(May 17, 2011) SOUTHFIELD, Mich. (PRNewswire) — A newly released study by A.T. Kearney forecasts 13.2 million new autos will be sold in the U.S. this year. The study further anticipates an upward trend toward pre-recession levels of about 16 million units by 2013.

Since 2007, total new and used pent-up demand has accumulated to 32 million units, of which more than nine million will materialize in the new vehicle market over the next five to seven years. The remaining 23 million units will sell in the used-car market. 

The study cautions, however, that the availability of financing, total cost of ownership and the unfolding events in Japan will impact vehicle sales in both markets.

Behind the forecast, four key macroeconomic factors were measured.  Economic recovery scenarios were developed to project the possible outcomes, the variables being: 1) overall economic growth; 2) credit availability; 3) consumer prices; and 4) consumer confidence. 

Pent-up demand and whether the recent downturn will resemble prior recessions adds additional factors, as does vehicle age and the need to replace older cars, the current average age being 10.4 years.  The forecast's wild card is Japan, where in the aftermath of the earthquake and tsunami, parts shortages will impact 2011 U.S. new vehicle sales by 200,000 units. 

Dan Cheng, partner and leader of A.T. Kearney's Automotive Practice, notes, "Given what we know about production downtime, in 2011 we see 328,000 U.S. customers of the affected brands up for grabs, and more if the time to wait for a particular brand begins to extend."

Another variable is the creation of 15 million "new sub-prime consumers" from the recession. From this group, the study estimates that at current loan approval rates, approximately 530,000 customers would be locked out of the new vehicle market. This represents a $3.2 billion contribution opportunity for the auto OEMs.

Cheng observes, "Auto lenders who understand that lending has more nuance to it than a FICO score and are able to accurately size up credit risk in a lower FICO-score environment, will better avail themselves of the opportunity to help buyers finance new car purchases." 

The sharp rise in gasoline prices over the past year, along with the weakened U.S. dollar, will continue to have an impact on consumer purchasing decisions.  Since 1996, gas-price fluctuations have explained more than 72 percent of the volatility seen in new small car sales.  A.T. Kearney's Cheng points out that one way for OEMs to navigate this uncertainty is to develop the capability to flex production in terms of vehicle size.  He remarks, "OEMs will have to respond rapidly to shifting customer demand.  Those that have a flexible manufacturing capability and a responsive supply base will win the day." 

Further, the study finds that when fuel prices increase rapidly, consumers seeking to maintain their total fuel expense as a percentage of their disposable income have a variety of choices beyond simply moving to a smaller vehicle with higher fuel economy. Therefore the mix of purchase price, gasoline consumption, finance charges, maintenance and insurance expenses will ultimately factor toward the purchasing decision, with ramifications to the overall demand for new cars. 

A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results.