FEBRUARY 2005

Auto Sales Outlook

Sales of light vehicles which include cars, light trucks, minivans, and sport utility vehicles reached 16.86 million units in 2004—the fourth highest sales mark in the industry's history and an increase of 1.4 percent over 2003. Despite higher gasoline prices, light truck sales continued to outpace car sales in 2004. Sales of light trucks increased 3.7 percent when compared to 2003 to 9.36 million units. Car sales fell 1.4 percent from 2003 levels to 7.51 million units. At the Federal Reserve Bank of Chicago Economic Outlook Symposium, David P. Teolis, a senior economist for General Motors Corporation, noted that the luxury vehicle segment of the market (which includes the decade-old luxury truck category) has experienced a rapid increase in demand in recent years. This increase in volume in the luxury segment has positioned the pre-owned luxury vehicle market as an important challenger to the non-luxury vehicle market.

Teolis remarked that gas prices will not hamper vehicle sales in 2005. He cited a survey of prospective auto buyers that revealed that gas prices ranked 13th on their list of factors to consider before making an auto purchase. Fitch Ratings expects vehicle sales of 16.5 million to 17 million units in 2005. Morgan Stanley's auto analyst, Steve Girsky, expects a 1.5 percent decline in light vehicle sales in 2005 to 16.6 million units. An annual survey of 110 auto industry executives from North America, Europe, and Asia conducted late last year by KPMG revealed "a growing sense that industry-wide peak earnings are coming sooner, rather than later...the top vote getters were 2006 and 2007."