Why Car Sales May Not Improve In 2011

By Douglas A. McIntyre Published Nov 30, 11:46AM EST

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Car sales are expected to be moderately good for November. Most car companies will have results which are an improvement over October, but comparisons with last November are quite likely to be down between 5% and 10% for the industry.

According to Edmund’s, the car trends research firm, new car sales for November will be about 865,000 units, including includes fleet sales. Edmund’s “predicts that November’s Seasonally Adjusted Annualized Rate (SAAR) will be 12.2 million, essentially flat from October 2010. SAAR for retail sales is about 9.9 million, down slightly from last month.”

Incidentally, sales of cars and light trucks should rise 17% from October, according to Edmund’s. The leader in terms of improvement will be Ford Motor (NYSE: F) up 25.6%. That is not surprising because Ford has done so well with the success of its new products. Toyota Motor (NYSE: TM) will have the most challenging month, down 1.8%.

Part of the reason for lagging sales in the past year is that drivers have developed the habit of keeping their cars much longer than they did just four years ago. Part of this is due to frugality, part is due to unemployment, and part because vehicles built recently and to have a longer shelf life. They are simply built better.

Research firm RL Polk says “the average length of ownership of new vehicles continues to increase. Consumers are now holding onto a new vehicle, on average, for 63.9 months based on second quarter 2010 data, up 4.5 months from the same time last year.”

The trend has gotten worse – as far as car companies are concerned – since early 2008, when the economy caused domestic vehicle sales to crater.

There is a theory that as cars reach the age when they must be replaced, new car sales will pick up. This assumes that people will not continue to repair their cars or will not replace them with used ones. Eventually, some drivers may elect to purchase a new vehicle for vanity reasons or access to warranties. It is a long shot, however, for the car companies to think that will happen any time soon.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.