Are New Car Sales Approaching a Cliff?

Ramsey, NJ (PRWEB) June 29, 2012

The TechnoMetrica Auto Demand Index, is a national survey conducted every month since 2007 to determine the publics interest in buying or leasing a new vehicle within the next six months. The June results show an ADI of just 55, confirming new car purchase intent has dropped significantly from its high of 105 in February. In spite of four months of depressed Auto Demand Index, vehicle sales in the US have remained reasonably strong, but why and for how long? Raghavan Mayur, president of TechnoMetrica suggests that the likelihood of a significant new vehicle sales slowdown is likely very close.

We have been conducting the Auto Demand Index for more than 5 years and it has been an excellent predictor of new vehicle sales, its correlation is approximately 90%. In March we saw the ADI drop precipitously, yet vehicle sales continued apparently unaffected by the publics decline in demand, Mayur explained. I attribute this to two factors. First, the average car on the road today is older than ever before and some owners decided it made more sense to replace their car rather than invest in a major repair. The second factor is the increased incentive spending by the manufacturers. You need only open a newspaper or turn on the TV and you cant help but notice the deals offered by even the most prestigious manufacturers.

Ultimately, lack of consumer demand will result in decreased sales. In June, just 9% of those surveyed indicated they would be very likely or somewhat likely to buy or lease a new car within the next six months, down from 16% in February. This decline in demand as we approach the industrys important summer selling season is likely to result in either very weak sales in terms of volume or very high expenses in terms of incentives. Neither will be good for auto manufacturers.

The Auto Demand Index survey also asks people which brand of vehicle they would be most likely to buy. Ford was the number one brand named, but its share fell from 21% in January to 15% in June. During the same period, Toyota rallied from 8% in January to 15% in June, virtually neck and neck with Ford. Similarly, Chevrolet declined from 15% in January to 11% in June, allowing Honda to inch ahead and capture third place at 12%. The increased interest enjoyed by the American brands during 2011 seems to have evaporated during 2012.

I take no pleasure in telling people that the public is likely to buy fewer cars in the months ahead, stated Mayur, but to be forewarned is to be forearmed. As you might expect, TechnoMetrica believes that good research can help companies to prepare for the future. Based on the past several months of the ADI, this might mean adjusting down production rates and carefully monitoring inventory levels. Mayur is also quick to point out the ADI is a forward looking indicator of consumers intent, so it can also help to determine when to raise production rates to accommodate increasing consumer demand. Good news is by far the better appreciated aspect of our business, Mayur reflected.

The positive demand momentum that the ADI had been showing since August of 2011 was broken in March of this year. Mayur states that his research suggests this was due in large part to the rapid run-up in gasoline prices around that time. During the subsequent months, world economic issues and the stumbling US recovery had a dampening effect on peoples confidence to commit to acquiring a new vehicle.

TechnoMetricas monthly Auto Demand Index research was initiated in 2007. Each month the company uses Random Digit Dial telephone technology to conduct live interviews with more than 900 respondents, yielding statistically significant data a margin of error of +/- 3 percentage points.

About TechnoMetrica Market Intelligence:

TechnoMetrica Market Intelligence Inc. is a progressive full-service research firm established in 1992. The firm, headquartered in Ramsey, New Jersey provides both quantitative and qualitative solutions to the business and government markets. TechnoMetrica has been providing innovative research solutions to many of the worlds most respected automotive brands for over a decade. In partnership with Investors Business Daily, TechnoMetrica conducts IBD/TIPP polls, including the nationally-recognized IBD/TIPP Economic Optimism Index. IBD/TIPP was the most accurate pollster in both the 2008 and 2004 presidential elections, according to final FEC-certified results of those elections. TIPP is also the polling partner of The Christian Science Monitor and the Monitor/TIPP polls regularly appear in the paper.

Note to Editors:

Users of these statistics should attribute credit and source to TechnoMetrica as this research is proprietary. To review the entire TIPP Auto Demand Index for April

visit: http://www.tipponline.com