Special Coverage

NADA Convention & Exposition

NEW ORLEANS – U.S. light-vehicle sales will be 12.7 million units this year, the National Automobile Dealers Assn.’s chief economist says in a relatively optimistic prediction.

Paul Taylor’s 2009 sales estimate still would be fewer vehicles than were sold in 2008, a resoundingly bad year for the auto industry.

But other forecasts are less rosy. For instance, J.D. Power and Associates, citing the poor economy, foresees only 11.4 million new-vehicle deliveries this year. Some predictions are even lower than that, with auto makers such as General Motors Corp. planning under the assumption sales may fall to as low as 10.5 million units.

Taylor waves them off.

“When I see forecasts for 10 million vehicles, I say wait a minute,” he tells journalists at the NADA convention here. “We have all these additional households; we have all these new drivers; we have unprecedented stimulus efforts to make sure this economy doesn’t fail.”

Vehicle sales nose-dived to 13.2 million last year, an 18% drop from 2007 deliveries.

Like other forecasters, Taylor believes 2010 will be when the economy and vehicle sales pick up again. “That will be the year dealers are in a better mood at this convention, as sales reach the level they had been at for most of the last 15 years,” he says.

Vehicle deliveries during the earlier years of the decade were record breaking, often topping 17 million units. But stock-market and real-estate bubbles drove those boon years, Taylor says.

“I don’t believe government regulators will let us go through that again,” he says. “I don’t think sales of 17 million units are immediately ahead of us. But I expect we’ll get back to 15 million after 2010. Beyond that, 15.5 million would be almost a baseline in a strong year.”

Falling home values correlate with fewer vehicle sales, he says, noting that four states with today’s worst real-estate markets – Nevada, California, Florida and Arizona – have some of the most drastic reductions in new-car registrations.

“It’s not by accident that the worst real-estate states had the worst car sales,” says Taylor.

Real-estate corrections are expected to continue this year in 22 states, mostly on the east and west coasts and in the Great Lakes region.

Home values are stabilizing in the other 28 states, where bank portfolios also are in better shape, he says. “Home prices must stop falling in the 22 problem states for car sales to improve.”

Bankers must increase lending to consumers and dealers for sales to rebound, he says. “And regulators must stop over-regulating sound banks, something that does not make up for past under regulation.”

Taylor expects government stimulus programs to help jumpstart the economy.

“There is a tendency to make fun of politicians, but when they decide to do something, they can make things happen,” he says. “The question is (whether) they get the monetary stimulus out in a couple years, so as not to induce inflation.”

Some people liken the current economic crisis to the Great Depression, but that’s “misguided,” Taylor says.

Instead, today’s recession has more in common with the downturn of 1980 to 1982, when credit was not readily available and interest rates were high, he says. Back then, like today, car sales fell, dealers faced economic stress and dealership numbers declined.

Calling the American economy the most productive in the world, Taylor predicts the U.S. will be the first nation out of the global recession.