US: Scrappage exceeds new light vehicle sales – Polk
The number of cars and light trucks in the US scrapped in the 15 months to the end of September 2009 substantially outnumbers new vehicle registrations in the US during the same period, according to recent analysis by analysts at RL Polk.
Polk said that more than 14.8 million cars and light trucks were retired from the fleet between July 1, 2008 and September 30, 2009, compared to new registrations of slightly more than 13.6 million, resulting in an overall scrap rate of 6.1 percent.
This includes thousands of units scrapped during last year’s CARS program, known as ‘Cash for Clunkers,’ and follows a trend seen by Polk over the past five years.
Polk forecast that scrappage rates could continue to outpace new vehicle registrations for at least another year.
Some auto industry executives say the high scrappage rate and rising age of vehicles on the road will eventually help create a rebound in US vehicle sales.
Polk says that the increase in the average age of light vehicles on the road is up 21 percent in the past 14 years. The average age for all light vehicles during the 15-month period is 10.2 years.
Additionally, increases in the average age are supported by the fact that consumers are keeping their cars and trucks longer. As of September 2009, the average length of ownership for a new or used vehicle among U.S. consumers was 49.9 months, up from 45 months a year ago the same time.
These trends are supported by a number of factors, including the economy, limited financing and leasing options available in the market, extended warranties offered by OEMs, and improved vehicle durability and quality of vehicles. They also provide opportunity for various business segments of the industry, according to Polk.
“As vehicles age and consumers continue to hold onto them longer, there are significant opportunities for repair services and parts demand for the aftermarket as vehicles are falling out of warranty as they age,” said Mark Seng, vice president, sales and client services, aftermarket and commercial vehicle, at Polk. “The increased complexity of vehicle repairs also presents a business opportunity for service professionals as traditional do-it-yourself consumers are less likely to attempt complicated technical work on their vehicles.”
Dealers will have an opportunity to develop programs geared toward service loyalty marketing as they seek to hold onto a growing base of customers, according to Polk. “The trends we’re seeing suggest great motivation for dealers seeking to maintain a longer-term relationship with their customers,” said Lonnie Miller, vice president, marketing and industry analysis, at Polk.
“Service-oriented loyalty programs can significantly contribute to improving business and overall loyalty among customers,” he continued.
Polk expects conditions facing the U.S. automotive industry today to remain through 2010 and expects trends for scrappage and vehicle ownership to continue for at least another year. This assessment is largely based on current industry dynamics, coupled with Polk’s annual forecast of a moderate increase in light vehicle sales to 11.5 million units this year. It also assumes a general upward trend for vehicle scrappage rates as high volumes of older vehicles continue to retire from the US fleet.