John McElroy Sees Bright Future for American Automakers

Sep 16, 2009
At the 41st annual Automotive Fleet & Leasing Association (AFLA) conference this week, industry analyst and host of Autoline Detroit John McElroy told those in attendance that reduced capacity, increased demand, and changes in the marketplace will “perfectly align” for American automakers in the next five years.

McElroy gave a presentation at the conference entitled “The Golden Years in the U.S. Auto Market, 2010-2015”, which outlined the positive impacts of the economic downturn on the future of the auto industry.  He believes that a pent-up demand from harder times will create such a buyer rush that automakers will no longer need to offer incentives to customers, leading to higher profits along with the increased sales.  McElroy suggested that Ford would first see massive profits, followed by GM and Chrysler.

While the financial misfortune of the Big Three had a terrible impact on their business, McElroy says that the same situation created several positive conditions that will lead to recovery.  He cited lower labor costs, elimination of excess capacity, and lower break-even points as indicators that the automakers will have greater success in the future.

The market itself has also shifted, according to the presentation.  Environmental regulations have begun to force consumers away from large trucks and SUVs toward smaller cars.  Prices on these new vehicles may rise up to $5,000 per unit to make up for the loss of profits from fewer truck sales and the costs of new technology.

The used car market, he said, is set to experience a “boom time” in the coming years as the number of used vehicles available declines due to fewer trade-ins.  Other factors include reduced rentals and fleet sales.

Whether McElroy’s predictions are accurate will have to be seen over the next few years, but an upturn for the auto industry would certainly be a welcome change.

Photo courtesy of nDevilTV under the Creative Commons License.