The auto industry is tooting its horn, and Sirius XM Radio (NASDAQ:SIRI) should be coming along for the ride.
Auto tracker Edmunds predicts that U.S. car sales will clock in at 15.5 million this year, up from its earlier forecast calling for 15 million light vehicles. If so, this would be the auto industry's strongest year since 2007 -- and Edmunds feels that there's room for even more improvement come 2014 given the long average age of cars presently on the road.
Demand is there. The new cars with new toys are compelling. As long as the economy doesn't collapse, it's going to be a good time to be behind the wheel of the automotive industry.
This is naturally great news for Sirius XM. It has a roughly 68% penetration rate in the automotive industry, meaning that more than two-thirds of the new cars rolling into showrooms these days come with Sirius or XM receivers. The satellite radio provider's 45% conversion rate last year means that nearly half of the buyers of cars with satellite receivers convert into self-paying customers after their free trials run out. The rough math means that an additional 500,000 cars in the market will translate into roughly 150,000 gross subscriber additions.
There's more to the math than that, of course, but the bottom line here is that Sirius XM thrives when the automotive industry is revving higher.
Edmunds' upbeat revision comes as the major car makers posted generally positive sales reports for the month of March.
Ford and Fiat's Chrysler, in particular, had spectacular showings, with sales up 5.7% and 5%, respectively, in March. It was the strongest showing for either company since 2007. Rival automakers didn't have it as good, but the collective reports this morning was enough to get Edmunds to jack up its 2013 goal.
The car buyers are coming. Now it's up to Sirius XM to keep them.
Longtime Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.