Automotive Demand Index Slips Slightly, Still Very Strong

Automotive Demand Index Slips Slightly, Still Very Strong

TechnoMetrica forecasts auto sales will remain strong in the coming months, hovering around 18.5 to 19.0 million annualized units.

Raghavan Mayur

The TechnoMetrica Auto Demand Index (ADI) declined by 12-points, or 6.5 percent, to 173 in May.  The average ADI since the onset of COVID has been 167, compared to 173 this month.

What Is ADI?

TechnoMetrica Market Intelligence developed the Auto Demand Index, or ADI, as a way to measure the intent of consumers to buy or lease a new vehicle within the next six months.

Every month we conduct a national survey with 1,200 adult Americans and ask the critical question, "How likely is it that you will buy or lease a new vehicle within the next six months?"  Based on the responses to the question, we compute an index score. For example, in our May survey, 15.3% of respondents said they are very likely to buy or lease a new vehicle, and another 13.3% said they are somewhat likely to do so.  We index these purchase intent levels to our anchor -- i.e., vehicle purchase intent level of 16.5% in the first quarter of 2007 to 100.

TechnoMetrica has been tracking auto demand since 2007, and the data is a good predictor of what will happen in the future.  The index's valuable intelligence can help OEMs, and their suppliers plan production and incentive programs and take proactive measures.

TechnoMetrica Automotive Demand Index Tracking Chart

Momentum

Despite a drop in May's momentum, our momentum indicator for the auto demand index remains strong.  Since we began tracking in February 2007, the indicator reached its all-time highs this past December and January at 15.6.

The official annualized sales totaled 18.5 million units in April, a new high since tracking began in January 1976.

U.S. Bureau Of Economic Analysis Light Weight Vehicle Sales Tracking Chart

The momentum indicator based on the seasonally adjusted annual rate of auto sales has reached a new high of 0.7 million units.

We use the difference between the 6-month exponential moving average (fast average) and the twelve-month exponential moving average (slow average) as our momentum indicator.

Exponential Moving Average Of MACD Index And MACD Sales Comparison Chart

Sizing Up The Current Environment

At TechnoMetrica, we believe the economy is about to take off.   We anticipate that the rebound will be decisive, allowing us to put the pandemic's dark days behind us.  Numerous prominent economists share our enthusiasm.

The TIPP Economic Optimism Index, a leading indicator of consumer confidence, fell slightly after rising for four months in a row. The index dropped 3.5 percent from the pandemic high of 56.4 in April to 54.4 in May.

President Biden's tax increases and spending plans appear to have eroded high-income earners' confidence, which has dropped 9.5 points, or 14%, from 67.8 in April to 58.3 in May.

Consumer spending drives two-thirds of the economy.  Optimistic consumers spend money on automobiles, home improvements, new homes, and other big-ticket items.

The average for the fourteen months since the pandemic began is 50.4 compared to May's reading of 54.4.

TIPP Economic Optimism Index And Components Monthly Tracking Chart

Hot Demographic Segments

The hot demographic segments are parents, households with incomes $100K+, those in the 25 to 44 age group, Blacks/Hispanics, urban households, and the 25-44 age group.  Regionally the West is most bullish, followed by the Northeast and the South.  The Midwest finishes last.

Urban areas are hot, suburbs are moderate, and rural regions are cool.

TIPP Auto Demand Index Broken Down Into Segments Chart

Time Frame

The average purchase lead time shrank even further to 97 days.  The narrowing time frame reflects the momentum of the market and consumers' eagerness to buy a new vehicle.  The chart below presents the historical data for the past-17 months. Note the decreasing trend line.

TIPP Poll Automotive Demand Index Time To Purchase - Chart

Luxury vs. Non-Luxury

The luxury market looks strong. We anticipate a ratio of approximately 43 percent luxury to 57 percent non-luxury sales.

We expect the sales ratio between Asian, European, and American OEMs at 33%, 33%, and 34%, respectively, which may be the closest we have ever seen the market share in this country - split equally among the vehicle manufacturers from these three regions.

TIPP Poll Luxury VS. Non Luxury Tracking Chart
TIPP Monthly Tracking Chart For Luxury And Non-Luxury Automotives 

Hot Vehicle Types

Mid-size (17.3%), Compact (16.7%), and luxury SUV (12%) are the most popular, followed by small SUV (11.8%) and sub-compact (10.9%).

TIPP Auto Demand Index, 3 Month Average Vehicle Preference Chart

Hottest Brands

We see a three-way tussle between Toyota, Ford, and Chevrolet for the non-luxury segment. BMW, Audi, and Acura lead the luxury segment.

Robert Austin's Views

The public still seems quite interested in acquiring new vehicles this year.  It is one of the best ways to express their desire to return to the normalcy that existed before COVID.

Our report does not reflect the recent gasoline shortage on the East coast, which may encourage people to shop for cars with even better fuel economy during the balance of this year.

Manufacturers have had some issues getting cars to market this year because of COVID, and supply line issues, including microchip shortages.  This combination of rising consumer demand for new vehicles at a time when manufacturers are having difficulty delivering new cars to dealers will almost certainly result in higher transaction prices at the dealership, as demand may outstrip supply.

It will be interesting to see how the public will greet the new crop of electric vehicles.  They will come to market at a much greater rate than at any time in the past.

Raghavan Mayur's Views

Actual vehicle sales demonstrate that TechnoMetrica's forecast was correct.

The overall economy is improving, which will help the automotive industry.  We anticipate that auto sales will remain strong in the coming months, hovering around 18.5 to 19.0 million annualized units.

On the downside, the timing of tax increases is not ideal for an economy that is barely showing signs of life.  Furthermore, there are too many variables that can influence energy prices, which is a wild card.

About The Survey

From April 28 to April 30, TechnoMetrica polled 1,300 adults online using a sample taken from its online panel network. The credibility Interval for the survey is +/- 2.8 points.


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