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Two More Years of Strong Auto Sales?

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Auto sales continue to rise globally with the US market experiencing strong gains. The year-over-year streak may continue until 2018 when economic headwinds contribute to the first decline since 2009.

US auto sales are the strongest we have seen since before the last recession with domestic manufacturing plants operating at full capacity. Sales in September increased by more than 16 percent, translating to a selling rate topping 18 million units annually.

Ever since reaching bottom in 2009, the domestic market has been on a rebound. Indeed, Fiat Chrysler is currently enjoying a 68-month streak of year-over-year sales increases, Subaru is gaining market share at the expense of its rivals, and Audi continues to claim a larger slice of the luxury market and has a 57-month sales streak of its own.

IHS Automotive: Auto Sales Pull Back

The good news may continue for a while, but a pull back is coming. That’s the opinion of market research company IHS Automotive, whose forecast sees auto sales inching up over the next two calendar years before beginning to pull back over rising interest rates and other market factors.

US auto sales forecastOn Tuesday, IHS Automotive released a report, “Global Economic and Automotive Outlook,” offering a fall update of the global automotive market, including the status of the US automotive market. Presented by Charles Chesbrough, Senior Principal Economist — IHS Automotive, the report (opens to a .pdf) concluded that consumer buying desire remains high, while the strong labor market improves their ability to purchase a new car.

Annual Forecast Adjustment

The favorable conditions currently at play also include stronger consumer confidence, consistent job creation, slight increases in wages, low gas prices, and the widespread availability of high tech products. Further, manufacturers are benefitting from a lower cost of materials and have been responding with numerous new products and updates. Credit availability is excellent and low loan interest rates are making purchasing a new car possible for a larger group of consumers.

The continued upswing of the auto industry has prompted IHS Automotive to adjust its earlier forecast. The research firm now sees US auto sales finishing at 17.3 million units this year, up from 16.5 million in 2014. Further, IHS estimates that the market will support 17.8 million units in 2016 and peak at 18.2 million units in 2017 before pulling back in 2018.

The Coming Blow Back

Headwinds are on the way and that translates into an industry downturn beginning in 2018. By then, tighter credit will begin to restrict consumer access to the market with auto sales drifting downward to 17 million units sold annually by 2022 reports Automotive News. Notably, the anticipated decline does not factor in the typical sales plunge that usually follows peak auto sales, with Chesbrough leaning toward a more modest pull back.

Chesbrough also noted the industry is in a much better position these days with production capacity and demand ideally aligned. In addition, improved labor contracts along with incentive discipline are benefitting the industry. In times past the industry used various schemes to spike traffic, only to see sales fall and profits with it once the programs were ended.

China Sets the Pace

The IHS study examined global markets with China remaining by far the largest market for new cars. Indeed, China overtook the US as the top market for new cars in the last recession, reaching 23.5 million units sold in 2014.

China’s annual auto sales should reach 30 million units by 2020 with 32.2 million sales forecast by 2022. China alone will account for nearly half of the world’s incremental growth through 2020.

India is another market in the midst of a healthy growth cycle, while Brazil and Russia continue to experience losses, a trend that won’t end before 2017. Japan and the Eurozone are enjoying a modest uptick in gross domestic product (GDP), but at a pace slower than the current 2.6 percent global average.

See Also — Flagging Fiat Sales: No Easy Answers

Deep Purple 1919 Pierce-Arrow Wins Best in Show at Pinehurst Concours

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It’s a wrap for the 2015 edition of the Pinehurst Concours d’Elegance. This year’s show was the largest one yet with 280 vehicles judged across 13 categories.

Porsche Row at the 2015 Pinehurst Concours d'Elegance.

Porsche Row at the 2015 Pinehurst Concours d’Elegance.

The third annual Pinehurst Concours d’Elegance has concluded and with it came yet another successful event for this emerging vintage auto show. The Pinehurst Resort is North Carolina’s golf mecca and the Concours tournament has become its crowning non-golf achievement.

Indeed, in just three years the Concours d’Elegance has grown into a jam-packed, two-day affair, featuring an Iron Mike Rally and the Concours display itself. Unfortunately, heavy rain canceled this year’s Iron Mike, named for the 15-foot tall statute at Fort Bragg that honors America’s paratroopers. The resort’s proximity to the military base lends to that tie-in, with a soldier’s choice award just one of numerous honors associated with the Pinehurst Concours.

Pinehurst Concours Grand Marshall, Dennis Haysbert.

Grand Marshal and Hollywood celebrity Dennis Haysbert
greets the throngs at Pinehurst Concours.

Pinehurst Concours Winner

Saturday, however, dawned cool and bright with little hint of the punishing storms on Friday remaining. More than 280 vehicles were on display, covering 13 judging categories. The overall winner this year was a 1919 Pierce-Arrow Model 64 A-4 Tourer, a stunning 7,000-pound exemplification of automobile design with its deep purple finish and naturally white tires. That vehicle was originally owned by Roscoe “Fatty” Arbuckle, one of the highest paid Hollywood actors of the 1920s.

Now owned by Bob Jepson, Jr., a Georgia businessman and philanthropist, Jepson purchased the automobile the previous September, and came to the resort expecting only to show the car and enjoy the venue. Instead, Jepson found himself standing beside Grand Marshal Dennis Haysbert and others as he was presented with the top award.

1919 Pierce-Arrow Model 64 A-4 Tourer

First in Show was this 1919 Pierce-Arrow Model 64 A-4 Tourer.

Other winners this year included a 1929 Franklin Model 137 and a 1948 Tucker 48 Sedan, winner of the Ross Awards. The Tufts Awards went to a 1937 Duesenberg JN Rollston SWB Convertible and to a 1913 Rolls-Royce Silver Ghost – L&E Tourer Chassis.

A 1950 Mercury 72c won a restoration award and the Chairman’s Award went to a 1969 Chevrolet Camaro Yenko. As for the men and women in uniform, they chose a 2015 McLaren P1 for the Soldier’s Choice award, a $1.35 million British super car and a 903-horsepower gas-electric hybrid at that.

Motorcycles, Orphans and Micro Cars — Oh My!

This year’s show welcomed motorcycles for the first time, what composed the thirteenth and final judging category. A 1975 BMW R90S placed first and a 1957 MV Agusta 125 Bialbero Corsa was also recognized.

Other judging categories covered pre- and post-World War II American and European models, Mercedes-Benz, Ferrari, Corvette, and Porsche. Categories for orphan cars, micro cars and American performance were also judged. Not one category featured vehicles built after 1975, thus the models on display ranged in age from 40 to 105.

Black Daggers Parachute Demonstration Team

One of four members of the Black Daggers Parachute Demonstration Team
from Fort Bragg who dropped in on Saturday.

A New Display and a USO Connection

The 2015 Concours d’Elegance layout was changed as the organizers combined the concours with the fairway club to administer a seamless “Cars & Coffee” type display. This year, the organizers also teamed up with the USO and strengthened its relationship with Fort Bragg. As a result, the Black Daggers Parachute Demonstration Team performed a drop, landing four specialists on the target in front of the club house.

At a news conference on Saturday morning, Pinehurst Concours chairman, Bob Ingram, and president, Jay Howard, shared how much the show has grown over the past year. Indeed, Ingram noted that 4,000 more tickets had already been sold than in 2014, although he declined to provide the precise sales numbers.

For the first time the Pinehurst Concours also featured a tie-in with a marquee band as the vintage rockers “Three Dog Night” entertained at 5 p.m.

Ingram noted that the “Pinehurst experience is different from many other places” as the proximity of the paddock and general admission parking provide ease of entrance for guests. Ingram pointed out that some of the more established Concours events have logistical challenges with attendees required to park far away and then bussed to the grounds. As for the Pinehurst Concours, the show’s organizers wanted their guests to arrive on the premises without operational hassles impacting their experience.

2015 Pinehurst Concours d'Elegance

An aerial shot of this year’s Pinehurst Concours.

Future Growth Potential

As improved as this year’s Pinehurst Concours was over the previous years, Ingrams believes that there is much more potential to be realized in the coming years. He emphasized that it would take “years to where it can possibly be” and by building it slowly it offers sustainable growth.

That there is no direct seasonal automotive competition to the Pinehurst Concours should help maturate the event. That it also has the potential to someday rival Pebble Beach or Amelia Island is something only the organizers may have in mind.

All photos copyright Auto Trends Magazine.

New Toyota Fuel Cell Vehicle Priced Near $70,000

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US introduction planned for summer 2015.

Toyota Fuel Cell Vehicle

Toyota’s plans to bring a mass produced fuel cell electric vehicle (FCV) to the market continues to unfold. Today, the world’s largest automaker supplied photos of the vehicle’s exterior and announced pricing for the Japanese market. At 7 million yen, Japanese consumers would pay the equivalent of US$ 68,787.62 to buy one.

Limited US Distribution Planned

The new vehicle is set to launch in Japan in April 2015 with US and European launches to follow that summer. The Toyota FCV will be made available at Toyota and Toyopet dealerships in Japan with sales limited to regions where a hydrogen fueling infrastructure is in place. US pricing will be announced later.

The Toyota FCV was first unveiled in concept form at the Toyota Motor Show last year. It builds on the company’s green credentials, what it has firmly established with its Toyota Prius hybrid electric vehicle line, and best known among low emissions, high mileage models. The automaker also produces other Toyota and Lexus hybrids.

Toyota has been producing FCVs for more than 20 years, first testing these vehicles in-house. In 2002, the automaker began leasing the Toyota FCHV — a fuel cell sport utility vehicle — to a small pool of customers in Japan and in the United States.

Toyota Fuel Cell Vehicle

Extended Range Technology

Since those first FCVs took to the road in 2002, Toyota has made incremental, but significant changes to the technology.

For instance, the company has worked to extend the vehicle’s cruising range to match what customers regularly enjoy from similar gas-powered models. That cruising range now comes in at about 700 kilometers (435 miles). Moreover, refueling takes just three minutes to complete. Water vapor is the only emission produced, the result of interaction between hydrogen and oxygen.

The Toyota FCV will arrive on the market a year after Hyundai introduced its 2015 Tucson FCV to the US, also in limited quantities, and available initially in California. The Hyundai FCV can only be leased, not bought.

Toyota Fuel Cell Vehicle

Toyota Fuel Cell Vehicle

Toyota’s FCV pricing, exclusive of a consumption tax, falls within the automaker’s anticipated price range. When pressed on its pricing plans previously, the automaker provided a wide price range of $50,000 to $100,000 for the US market.

Thus, you can expect that Toyota will hold its US pricing closer to what consumers will pay for this model in Japan. Like Hyundai, perhaps Toyota will offer a leasing plan stateside as well.

Toyota Fuel Cell Vehicle

Photos courtesy of Toyota Motor Corporation.

What Would Happen If We All Started Driving Electric Cars?

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Electric Cars

Nissan Leaf
What EV adoption could cost governments in lost tax revenue.

Governments around the world are continuing to incentivise the adoption of electric cars as a means of reducing C02 emissions and hence limiting damage caused to the environment.?? But, what would happen if we all took the bait and suddenly ditched our current motors in favour of an electric alternative?

British price comparison company MoneySupermarket.com has endeavoured to find the answer to this question.

Focusing on the UK

Being a UK-based company, MoneySupermarket started off by examining the impact on the British government. At the moment, electric car owners are exempt from road tax, which is usually about $240 for the average British motorist, and from congestion charging which can cost the equivalent of thousands of US dollars for drivers living in London.

On top of this, electric cars are generally granted car insurance discounts and are of course not obliged to pay fuel duty. The company crunched the numbers and found that the average British motorist would save about $1,440 per year by owning an electric vehicle.

This is a significant amount for the average family, but the impact would be even more substantial for the government who would lose over $36.3 billion every year through lost taxes. About 80 percent of this total would come from lost fuel duty, proving the British government’s reliance on this as a means of revenue generation. It should be noted that tax accounts for 10 percent less tax on fuel prices in the UK than it did 10 years ago, but this is due to the cost of raw oil, which has increased at a greater rate than fuel duty increases.

It is unlikely that any government would simply accept this loss and would undoubtedly find other ways of generating the same amount of money from its constituents. MoneySupermarket has suggested that this would therefore likely result in electric cars no longer being exempt from either road tax or congestion charging, as well as a greater rate of tax being applied on electricity usage which would hit all households hard.

Looking Beyond the UK

There are of course only 31 million cars on the road in the UK, so the impact on the United States and beyond would be far more significant.

Let???s start by examining fuel duty (taxes), which would of course be the most significant loss in the UK. There are over 250 million passenger vehicles registered in the USA, more than eight times the number of vehicles on the road in the UK.

Fuel tax rates generally differ depending on the state, but are always cheaper than those applied in the UK, starting at around 30.4 cents per gallon of gas. This means that the US government would lose out on about $1,968,590,000 of tax each year from fuel usage alone if every American driver chose an electric vehicle. With car tax and car insurance rates being cheaper in the United States as well, the tax loss wouldn’t be half as significant for the American government as it would in the UK.

However, American motorists are being offered a tax credit of up to $7,500 for an electric vehicle purchased today.

If every American motorist suddenly bought an electric car, that move could cost the federal government as much as $112.5 billion ($7,500 tax credit multiplied by the approximately 15 million cars sold annually).

Unlike the British government which would recoup their loses with tax increases in other areas, it would be far easier for the US government to simply turn off this tax incentive rather than attempting to get the money back by increasing tax in other areas.

An Electric World

This is a look at just two of the 196 countries in the world, but already the total loss to governments through green car adoption is potentially close to $3 trillion.

The American model will adapt far more easily to the impending electric car infiltration as the government will simply switch off this incentive. Inevitably electric car prices will come down to the levels of current fossil fuel reliant models and the average American would then theoretically slip almost seamlessly into the new world of electric motoring.

Things will be far tougher for people living in Britain though. With tax rises in electricity bills likely to hit all households, meaning that the impact of the electric car movement will not be limited to motorists only. The whole landscape of the British tax system will need to be reviewed.

Electric car photo courtesy of Nissan North America, Inc.