April 16, 2014
Most Trends Positive for Continued Auto Growth
Automotive has been the primary driver of North American steel consumption in the last few years, and there's more fuel left in that tank, said Richard Hilgert, auto analyst for Morningstar, during last month's Platts Steel Markets North America Conference in Chicago.
Most of the fundamentals affecting the auto industry are positive, Hilgert said. They include an upward trend in average miles driven, the aging vehicle fleet, a modest gap between new sales and scrappage rates, the number of licensed drivers outpacing light vehicle sales, higher used car prices and readily available credit.
However, a couple of the trends have both positive and negative implications, Hilgert said. The higher price for used cars makes leasing, rather than buying, a more attractive option. Demand for credit has led to growth in sub-prime loans, which represented 27 percent of all new car loans last year, up from 18 percent in 2009. "We don't want to see the sub-prime market get too high. That was one of the things that created the demand bubble in the last decade," he said. The only two factors working against new car sales are high unemployment figures and low consumer confidence levels, he added.
Morningstar is forecasting new car sales to increase modestly in 2014, up from 15.6 million units in 2013 to 15.9-16.2 million this year. The auto market should return to pre-crisis levels before the end of the decade, Hilgert said.
For more information on the automotive market and the Platts conference, see the April issue of Metal Center News.