The resurgence of US
In February, auto makers sold light vehicles at a 15.4 million unit annualized rate.
This chart is from Calculated Risk.
How high can it go?
A new note from Citi's Itay Michaeli says it can easily get to 16-17 million. His note is titled: 11.8 Million Reasons to Be Bullish on SAAR.
Michaeli says that despite the big surge in car sales, we're still seeing below-average fleet scrapage. There's a lot of pent-up demand.
If Someone Asked You — In 2012, U.S. auto sales rose a robust 13% to 14.4 million. The popular explanation was that an aging fleet was finally releasing pent-up demand. Subscribing to this explanation, one would think that the U.S. scrap rate must have surely gone up last year, right? Wrong. According to fresh Polk data, the U.S. apparently scrapped only 4.7% of light vehicles last year (11.8mln), down from 5.0% the prior year (5.2% avg. since ‘02). So why did auto sales rise? Because of the very improvement in vehicle density that our Sep-11 density survey originally predicted (“Do They Want to Drive?”). In other words, for the first time since 2007, the U.S. vehicle population managed to grow by 1.0%, which is more in-line with the driver population.
So What Does This Mean? — Vehicles continued to age last year (now 11.4yrs old) despite a “strong” SAAR, meaning that investors likely haven’t missed the pent-up demand cycle—in fact it doesn’t appear like it’s even begun. This may be very good news for the U.S. auto cycle, so long, of course, as vehicle density doesn’t spoil the party again (our survey closely tracks the 2yr density outlook, next survey due out in May). But with >251 million light vehicles on the road, returning to a mid-5% scrap (avg. 2002-08) + ~1% population growth easily gets us to a 16-17 million SAAR.
SEE ALSO: The 19 best-selling cars in America >