Get ready for the industry manufacturing wave. If only HALF the industry needed a single stretch, that would mean the demand for new limos could top 4,000 units. Recently I was asked by a supplier to show a sales report for limousine production over the past 25+ years. Because we are entering the biggest vehicle transition time we have ever known, I am sharing with you this information to help you prepare. [See the numbers in the accompanying chart].
We are bouncing back from the longest recession ever. Our closest comparison is the recovery period after the early 90s recession when the banking industry was hurt by the junk bond market, which crashed the savings and loan industry. That was a four- to five-year turnaround until lending loosened up. That is the linchpin here. When our industry can get financing, sales will go up.
Here are the reasons why limousine and chauffeured vehicle purchases are stalled:
1) It’s too hard to get vehicles financed with the banking industry recovering from their major losses.
2) Low demand during recessions = low mileage. The normal three-year turnover has not been there. Limousines are averaging five- to six-year lifespans.
3) Fear of the unknown: Operators have low confidence because their client books have not been stable. Keeping costs down is a priority; they are taking a wait-and-see attitude and want more evidence that the market is on a full recovery. The market is better but still not stable.
4) Product confusion: No one knows the full details of what the next certified limousine will be. Operators were not expected to make purchases this year unless they had too.
2012 will be telling. We will have a lot more of the answers for the above, which means more clarity. From that point, I expect a continued increase in limo product from mid-2012 on. By model year 2013, I expect a substantial spike in limo sales. I know the economy will be much better and people will be out partying. The 2012 Presidential election will resolve emotional fears, financing will improve, the limos in circulation will be on life support, and we will have figured out what will be the primary stretch.
There has been much chatter about the sedan market but what about the stretches? Nearly half of operator revenues are derived from special occasions. In 1990, there were about 6,000 limos built and sold, and 62 coachbuilders in business to handle the demand.
Today, there are less than a dozen manufacturers in the business. Think about this one. There are 8,000 operators in business. Even the most conservative operators need ONE token limousine for the just-in-case VIP whose daughter is getting married or wife that wants to have a ladies-night-out. If only HALF the industry needed a single stretch, that would mean the demand for a new limousine could top 4,000 units. It is estimated that the new limousines in the first and second year will take three weeks to build. So you do the math. You may find yourself waiting a very long time unless you start thinking about getting on the presale lists with your preferred coachbuilder. That’s good news for the industry. But you’ll still need good luck.
CHART NUMBERS: Total Limousine Production (Year/Quantity) 1981 2500 (boom years) 1982 3000 1983 4000 (LCT Magazine is launched) 1984 6000 (LCT Show is started) 1985 6500 1986 6800 1987 7000 1988 5800 (caused by Black Monday, Oct. 1987; financing is a challenge, taking five years to recover) 1989 5600 1990 4400 1991 2500 1992 2000 1993 2500 1994 2250 1995 3400 1996 3700 1997 2750 (caused by news that the redesigned Lincoln Town Car was launching in 1998) 1998 3400 (fleet transition to cycle out old and add new TC creates 4-year sales run) 1999 4950 2000 5693 2001 6500 2002 3000 (stalled sales instigated by 9/11 attacks) 2003 2755 2004 3500 2005 2650 2006 3100 2007 2975 2008 2235 2009 375 (caused by the Great Recession) 2010 350