Has the Auto Recovery Only Just Begun?

The research note predicted that the primary driver for this growth will be the need for vehicle replacement. “We believe that the ultimate underlying driver of vehicle replacement is miles driven, which is what we use to measure fundamental demand for travel utility,” wrote Murphy and Lane. “We estimate that drivers in the US are essentially ‘using up’ 15 million units-worth of travel utility on an annual basis,” they added.

As the figures released by Autodata earlier this month indicated, manufacturers like General Motors (NYSE:GM), Ford (NYSE:F), and Toyota (NYSE:TM) will be the primary beneficiaries of this increased demand if current trends continue. These automakers drastically beat Wall Street’s expectations in January and predicted high single-digit growth rates for this year

Easier access to credit, low interest rates, a lower unemployment rate, and higher home prices were cited as reasons for the positive momentum in January sales by the National Automobile Dealers Association, and barring any unexpected apocalypse, these factors could help the prediction made by Merrill Lynch’s analysts come true.

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