Essay, Pages 4 (761 words)
Auto (motor vehicle) sales is another effective instrument for predicting consumer behavior and major macroeconomic trends in the U.S. The last months of 2008 will be marked by the lowest levels of auto sales since 1994.
Under the pressure of worsening macroeconomic conditions, auto sales companies will need to implement a completely new approach that will satisfy potential buyers and will not negatively impact their capability to make daily purchases.
U.S. economy operates numerous economic indicators. GDP, Inflation, Consumer Price Index represent the traditional set of economic indicators that are used for forecasting and profound economic analysis.
Auto (motor vehicle) sales is another effective instrument for predicting consumer behavior and major macroeconomic trends in the U.S. Auto sales forecasts are integrally linked to the operational planning issues in the motor vehicle industry: they help predict changes in the market situation and to develop cost-efficient strategies for adjusting to these market fluctuations.
The last months of 2008 will be marked by the lowest levels of auto sales since 1994. Here, the two forecasts presented by J.D. Power and Edmunds.com coincide. J.D. Power suggests that “U.S. new vehicle sales in 2008 are expected to reach their lowest levels since 1994, dropping to 14.95m cars and light trucks” (Editorial team, 2008). Edmunds.com continues the line of these unsatisfactory forecasts, stating that “monthly sales will drop 10.7 percent from last July, adjusted for the difference in the number of selling days” (Krebs, 2008). As an economic indicator, auto sales are also influenced by other economic indicators, including lower consumer confidence, weaker retail market, declining consumer spending, and turbulent financial conditions.
The auto sales downturn is combined with the fleet market shakes that add to the current uncertainty and risk in all U.S. markets (Editorial team, 2008).
As a result, even the most reputable vehicle manufacturing companies including Toyota are predicted to experience substantial sales decline. The two different forecasts are very similar to each other, but Edmunds.com offers a more detailed review of its predictions, and seems to be closer to the realistic situation in the U.S. retail vehicle markets. Moreover, J.D. Power was initially forecasting slow rebound of auto sales by the end of 2008 and at the beginning of 2009, but these forecasts will hardly become real: auto sales keep experiencing further decline, with 46.4 percent down as compared to June 2008 (Krebs, 2008).
Forecasts directly impact operational and planning procedures in auto sales. In this context, forecast accuracy is the critical element that guarantees appropriateness and cost-effectiveness of auto sales planning procedures. “The financial crisis, worsening oil prices, weak housing and stock markets, plus lower automaker discounts to retail customers, and the fact that automakers are purposely cutting unprofitable sales to daily rental fleets” should be taken into account when forecasts are used to develop new operational approaches in motor vehicle business (Henry, 2008). Forecasts change companies’ approaches to planning: planning becomes justified, relevant, and realistic. Accurate forecasts similar to those produced by Edmunds.com create a detailed picture of future in auto sales. Forecasts help predict consumer capability and willingness to purchase cars, and planning procedures are easily adjusted to the changing consumer demands.
Edmunds.com predicts that consumer demand for motor vehicles will keep falling, and the companies will either have to reduce manufacturing volumes, or will need to implement new marketing strategies to attract potential customers. Under the pressure of worsening macroeconomic conditions, auto sales companies will need to implement a completely new approach that will satisfy potential buyers and will not negatively impact their capability to make daily purchases. Edmunds.com has urged the need for auto sales companies to change their operational management strategies, and with the auto sales being a cyclical process, the companies should be prepared to serious financial losses that will accompany the state of macroeconomic recession in the U.S.
The year 2008 will become one of the worst years for auto sales companies. Edmunds.com and J.D. Power predict that auto sales will keep falling until the very end of 2008. Companies will need to adjust their operational and planning procedures to face the reducing demand for motor vehicles, and to develop new strategic approaches to sales under the pressure of macroeconomic recession in the U.S.
- Editorial team. (2008). U.S.: JD Power lowers new vehicle forecast. Retrieved August 23, 2008 from http://www.just-auto.com/article.aspx?id=94221
- Henry, J. (2008). Dismal J.D. Power auto forecast looks downright prescient. Retrieved August 23, 2008 from http://industry.bnet.com/auto/100042/dismal-jd-power-auto-forecast-looks-downright-prescient/
- Krebs, M. (2008). July forecast: another dismal month for vehicle sales – except for Honda and compact vehicles. Retrieved August 23, 2008 from http://www.autoobserver.com/2008/07/july-forecast-another-dismal-month-for-vehicle-sales—except-for-honda-and-compact-vehicles.html