January 13, 2012
Motley Fool advisor Joe Magyer recently showed an interesting chart depicting current U.S. auto sales next to "normalized" sales. By Joe's estimates, current auto sales are around 4 million vehicles a year shy of where we should be. That bodes well for the industry going forward, as pent-up demand will eventually break out into higher sales. He explained:
The average age of cars on U.S. roads is now a record 10.6 years ... as a tough economy has forced drivers to grind out just a few more miles on their clunkers. As those vehicles get more and more expensive to fix and used car prices hover near record highs, new vehicle demand will get pushed upward whether the economy comes along for the ride or not.
While the industry is beset by all kinds of problems, it's that pent-up demand that will eventually propel Ford (NYSE: F ) , GM (NYSE: GM ) , Honda (NYSE: HMC ) , and Toyota (NYSE: TM ) higher. The more frugal consumers are today, the greater the likelihood they'll open their wallets tomorrow.
I recently sat down with Mesirow Financial chief economist Diane Swonk for a wide-ranging talk about the economy. When I asked her what was going right in the economy, she echoed Joe's views and elaborated on the auto industry's possible revival. Have a look :
What do you think? Share your thoughts below.