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US Auto Sales won?t Rebound till Liquidity Improves
Feb 19, 2009

The US auto industry will not see much difference in its current situation during the first half of 2009, but some improvement is expected in the second half.

The US auto industry may not see much change in its situation this year as the total vehicle sales are projected to reach 13.1 Million, said the National Automobile Dealer Association, as reported by CLEVELAND.

The most optimistic projections for 2009 in terms of sales need people to buy around 13.5 Million cars and trucks, significantly low against over 16 Million in 2007, while the pessimistic prediction would be as low as 11 Million Units. Moreover, the total auto dealerships in the country are likely to plunge to around 19,170 by the end of 2009 from 21,200 at the end of 2007. In 2008, over 900 dealerships went out of business.

Low liquidity in the financial market and difficulties in borrowing money are critical factors behind 13.1 Million vehicles sales projection for 2009. At the end of 2008, accessibility to credit became extremely difficult, resulting in sales decline. However, the situation may improve and demand will spur with the normalization of lending.

However, automakers are likely to get some relief in the second half of 2009, but the first half will carry forward the downtrend of 2008. According to the association, the slowdown has brought noticeable changes in the auto industry, particularly on the dealership front.

Further, 2009 will present a lot of hurdles to auto manufacturers as the industry will see a wide shake-up under low sales and overcapacity. The toughest challenge auto manufacturers are now confronting is low consumer sentiment due to weak credit market. Consumers are struck by a fear of uncertainty.

According to a Research Analyst at RNCOS, “Relief packages should be given to the auto companies so that they can offer funds at reasonable rates. However, it needs to be understood that the bailout packages are not enough to bring the industry back on track; financial market and equity market have to be strengthened. Once the consumer has cash in his hands, walk-ins to stores will dramatically change.”

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