Consumer spending and auto sales during the 2008 economic recession

Business Marketing Report

The New York Auto Show is running this week from March 10-30, 2008. This week market trends in car buying are in the news. Auto manufacturers will carefully watch to see how consumers react to proposed new introductions to the market. With a sluggish economy, car sales were down the first part of 2008. However, some manufacturers are optimistic that consumers will use their tax rebates to boost new auto sales in the second half of the year (Labia, 2008). Tax rebates, combined with rebates from the President's economic stimulus plan are expected to double the impact of regular tax rebates. This will be important information, as manufacturers attempt to make production forecasts for the remainder of 2008. This is a big week for market research in the auto industry.

Analysis

In order to understand the trends behind this news report, one must develop and understanding of what has occurred in the auto industry over time. Reports that reflect single points in time, are not as important as overall trends in the overall industry. One must look at all of the major relevant factors that may influence auto sales in the future. This report indicated that auto manufacturers place considerable emphasis on the tax rebates as a factor that will drive sales in the remainder of 2008. However, this is a narrow perspective, when one considers the overall economy and the impact that it has had on auto sales thus far in the year.

This market report contradicts other reports that predict a "dismal" year in car sales for the remainder of 2008 (Vlasic, 2008). One of the key considerations in the decision regarding how to use market research is to determine its credibility. This research report only considers a single factor as a driver of future trends. There may be a correlation between consumers receiving the tax rebate and an uptrend in future care sales. However, this is only one variable in many that could effect consumer buying decisions.

Other factors that must be considered in the decision to increase or slow production for the remainder of 2008, one must consider the overall state of the economy. The auto market is entering a recessionary phase that mirrors what is happening in the over all economy (Vlasic, 2008). Consumers are heavily laden with debt already. Housing prices are falling and fuel prices are rising rapidly (Vlasic, 2008). These factors tend to make it difficult for consumers to find financing for new care purchases.

However, for those that do manage to secure loans, prices will be in their favor. This is good for the consumer and bad for the manufacturer, who faces lower profit margins than they have experienced in the past. A recent study found that consumers that are able to buy at this time are holding out for better deals as the situation for auto makers worsens (Vlasic, 2008).

Another factor to consider in the evaluation of a market report is the question of bias in the reporting. One would like to believe that the news reporter at CNBC is offering an objective view of the situation. However, the news and perceptions that are portrayed have a significant affect on consumer mood. If the reporter delivers a gloomy, albeit more realistic forecast. It could have an impact on the buying decisions of consumers. There is a consequence for reporting that things may actually get worse. Therefore, one must consider the possibility that the report may have been influenced by the responsibility of the reporter to the greater good of the American public. The information contained in the report is accurate, but does not necessarily reflect the views of the entire industry. It only reflects industry attitudes held by a select few in the industry. This sample size was too small to call this an industry-wide view of what the future holds.

Conclusion

It is clear from the market research report that manufacturers are optimistic in their projections of consumer spending for the rest of 2008. If one only considers the tax rebate as a relevant factor in consumer buying decisions, then it would be easy to paint a rosy picture for the rest of the year. This would lead to a decision to boost production for the rest of the year. However, if one takes a more realistic look at the situation and takes other factors such as the economy and rising gas prices into consideration, then the outlook does not look good for sales during 2008. this would lead to a decrease in production for the remainder of the year.

Whether consumer sales of automobiles recovers for the remainder of 2008, remains steady, of continues to fall, manufactures stand to lose money either way. If they overshoot their projections then they stand to lose in operating costs that will not be recovered. If they are too low in their predictions, then they stand to lose in lost sales. Considering the existence of conflicting information from other sources, and the general state of the economy, it is not recommended that this market report be used for forecasting future automobile trends. A more conservative approach should be used in forecasting production levels for the remainder of the 2008 model year.