New vehicle sales will not rise substantially as the US economy recovers, unlike past economic cycles when consumers’ pent-up demand boosted results, a top official with General Motors said on Wednesday, according to Reuters.
“We will probably not find a high degree of pent-up demand,” Paul Ballew, GM’s executive director of market and industry analysis, told Reuters. In past economic recoveries, “you got the abnormal spike in vehicle sales,” he reportedly said.
According to Reuters, Ballew said the automotive industry “cushioned the downside” of sales during the economic slowdown by offering high incentives and low financing rates. Low interest rates also helped.
Reuters noted that, in the midst of the US economic downturn, the US vehicle industry set a monthly sales record in October, 2001 when GM launched its zero percent offer.
According to Reuters, Ballew reaffirmed GM’s total vehicle sales outlook for July – a seasonally adjusted annual rate of as high as 17 million. He also reaffirmed GM’s outlook for 2003 total vehicle sales of 16.5 million.
“We are expecting a slight improvement next year as the economy accelerates a bit. The real challenging news is the pricing front,” he told Reuters.
Ballew told Reuters that stronger sales may allow the industry to trim sales incentives at the margins, but structural issues, including growing competition and overcapacity, will still put upward pressures on incentives.
“We are anticipating that we are going to continue to face a pretty aggressive pricing environment, not only in the US,” Ballew said, according to Reuters.