Likening the industry's current challenges to defense condition rankings, CNW Market Research says pent-up consumer demand is the only thing preventing the auto industry from reaching DefCon 5.
The last time the industry reached DefCon 5 was in 1990, a year marked by no sales and fewer intenders. The Bandon, Ore.-based market research company said in its July report that a vast majority of consumers intend to stand on the sidelines for at least 18 months, or until there's an economic turnaround.
Through the first half of the year, automakers saw more than 300,000 new-vehicle intenders drop out of the market, awaiting some type of economic rebound before re-entering the new-car market.
CNW says that number should reach 675,000 consumers by the end of the year, with more than 85 percent indicating that they will return to the market within 18 months. This reality does little for automakers, which need to sell 16.2 million vehicles this year to breakeven.
Among those who were only a month away from making a new-vehicle acquisition and elected to postpone the purchase, the average delay was more than 17 months. That's five months longer than those who put off a vehicle purchase in January and seven months longer than the full-year '07 average.
Among all new-vehicle intenders, CNW's Purchase Deferment Index showed the longest delay this year since it began keeping score 22 years ago at 11 months. Add the totals of those delaying a purchase (675,000) and those who are canceling a purchase (945,000) to the 15 million vehicles CNW expects to be sold this year and the industry could easily have sold more than 16.2 million units in 2008, CNW said.
CNW said the one bright spot is that interest in new cars remains high, even among those who are two or more years away from buying one. This is what's separating today's current struggles with what happened in 1990. In that year, about 16 percent of consumers who were delaying a vehicle purchase for two or more years never read about cars. Today, that percentage has dwindled to 5.6 percent.
"Sales are down because people are postponing a vehicle acquisition, and they can delay that purchase because cars have become significantly better from a quality standpoint," said CNW in its July report. "But they still show a high degree of interest in cars and trucks, based on their readership habits related to vehicles."