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AUTOMOTIVE INDUSTRY
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Kelley Blue Book predicts a rise in January new-car sales

Overseas tension and European debt are two major factors in vehicle sales projection

by Jennifer OckPublished: January 25, 2012 12:15 PM

Irvine-based Kelley Blue Book, a provider of new car and used car information, forecasts January new-vehicles sales to show a 10 percent year-over-year increase. At 900,000 units overall for the month or a 13.2 million Seasonally Adjusted Annualized Rate (SAAR), the indicator is 30 percent below the December high.

Due to a gradual U.S. economic recovery and aging vehicles, KBB predicts these two components will help increase sales in 2012. In December 2011, the unemployment rate dropped to 8.5 percent, as the economy added 200,00 jobs while vehicles on the road today average 10.8 years old.

"Our analysts have produced a regression model that explores unemployment, housing, consumer confidence and seasonal patterns to assist with our sales forecast for the year," said Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book.  "Given current market conditions and our expectations for 2012, we believe sales will continue to improve at a conservative pace in 2012.”

Despite such positive projections, downside risks remain prevalent.

International events such as the recent World Bank’s announcement predicting a stagnant global economy in 2012 and heightening tensions with Iran leading to a likely spike in oil prices, all of these impact the auto market, and, in turn, consumers’ buying decisions and habits.

"We remain especially concerned about the ongoing European debt crisis and the heightened tensions with Iran as potential events that could derail the current U.S. vehicle sales recovery," Gutierrez said. "The European debt crisis has been of particular concern in recent weeks due to the debt rating downgrade of France, Portugal, Italy, and other European economies, leading to concerns for their ability to generate interest in future bond offerings."

Yet, Blue Book remains optimistic, especially with GM, Ford, and Toyota hopefully leading the way to higher sales in January.

Individual manufacturers for all three companies are riding on the success of recent redesigns to keep their sales progressing. For General Motors, it may be another solid year with its Chevrolet Silverado, the compact Cruze, and the Equinox crossover. A new redesign for the Chevrolet Malibu later in the year could aid in the boost for more sales.  

After a decrease in market share from acceleration recalls in 2010 and its 2011 earthquake in Japan prompting an inevitable inventory shortage, Toyota is expected to make a prominent comeback.

"The sought-after Scion FR-S and ultra-efficient Prius C also should help bring excitement back to Toyota's lineup, something that has been lacking for several years," Gutierrez said. "Consumers seeking reliable resale values should also consider Toyota since they were recently named top brand at the 2012 Kelley Blue Book Best Resale Value Awards because of its industry leading five-year residual values. If that weren't enough to highlight Toyota's strength, visitors to kbb.com are already giving us strong signals of Toyota's expected rebound this year."


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