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Auto-Sales Improvement On the Way?

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    Mike Ward, Sterne Agee auto analyst, with his estimates for June auto sales.

  • Duration 3:43
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Okay -- thanks so much.

It's -- June auto sales numbers are out tomorrow morning Mike ward at Sterne Agee is here with some predictions.

What it means for the broader economy so let's get right to it what's your expectation for tomorrow you big -- we're gonna see an improvement.

And -- sorry you got I do think you'll see an improvement with the US light vehicle sales Europe against a pretty easy -- from last year.

But we're looking for 25% increase vs last year to about one point three million units.

Wow I mean yes that is that you say it is in part because of an easy comp.

Up but what is I act are there are a lot of people out there buying cars -- say three years ago four years ago two years ago I was -- Absolutely you're you're coming off the depths of the recession in 20082009.

And that the -- spending kind of a small but steady type recovery increasing about ten to 15% pretty consistently.

You're still the low -- of trend about 13 vehicles on the road.

For over twelve years of age you know -- a just a very if heavy replacement cycle over the next say three to five years -- how does that compare to what's normal.

-- it's a -- the vehicle fleet is older than it's ever bet is that historically getting better.

But definitely impart but I think at some point you start get a car with a 15200000.

Miles on it.

It becomes pretty Dicey if you're gonna keep for another couple years so at some point those vehicle be replaced in addition do you get about two million.

New licensed drivers into the market teacher and that's a plus as well.

So what can you say about what people are buying right now what they're avoiding -- their brands and types of cars that are selling particularly well in those that are being ignored.

You've seen a pretty consistent trend in the US marketable lasting decades.

Where you've got to shift towards more smaller vehicles.

And in the small vehicle category we include everything from small cars and small crossover vehicles crossover vehicles like the Ford Escape satisfy many of the needs.

Of a traditional SUV but it's a smaller more fuel efficient package and those vehicles now account for about 45% of the market.

Up from about 25% of the market -- in the late 1990s.

But you're still seeing strength in pick -- trucks luxury vehicles and you've seen weakness in some of the traditional electoral people carriers yeah large sport utilities Vikram incidence.

And what do you think it's gonna happen with that I mean we're seeing gas prices now go down.

Do you think that we'll see those suvs pick up again energy think that this is a real structural change.

Well I think the buyers of the big suvs are -- is going to be fires and suvs and whether they spend 2000 dollars hearing gas or 3000 really doesn't matter.

-- I think if you went back to the 1980s the last time we had a meaningful gas shock.

It was about five to ten years before you saw people readjust.

So -- I I think small vehicles are here to stay -- I think the US market will be consistently 40% plus small vehicle market for at least the next decade.

-- -- isn't quite at it a recovery in the economy are you worried at all that there are a lot of economists out -- predicting that now it seems like we're slowing down what do you think of these vehicle numbers.

May go down again.

We're at the low end of of trend you're basically right now replacing vehicles one to one you're not seeing much growth.

And so what you're seeing in the auto industry.

Is very similar what you're seeing in the overall economy I think one difference would be is that the auto industry you're coming from such low depths back from 2009.

Which -- now a kind of a base level.

Below what I would call normal -- so you still up some upside and then the next thing is is autos or are typically.

Early cyclicals they leave the rest of the economy.

And so I think over the next six to twelve months you'll probably see some of the other areas like employment income as people get a bit more confidence.

You start to see you buy a car first into your starts to.

Just sick -- -- finishing interpretation I hope you're right.

I wonder -- who want to believe and Diana thanks so much.

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