For comparison, the industry sold roughly 17 million units annually from 1999 to 2006, and 17.4 million light units in a single year is the U.S. high-water mark, set in 2000.
While accurately predicting the future when it comes to the new car market will be integral to the Obama administration's efforts to restructure GM and Chrysler, it will also play a role in accurately forecasting the environmental and energy gains from federal policies aimed at curbing fuel consumption and greenhouse gas emissions.
For example, in issuing the CAFE rule, DOT estimated it would save 887 million gallons of fuel and reduce carbon dioxide emissions by 8.3 million metric tons. But if sales stay at more than a third below the level predicted by DOT, the actual gains would likely fall well short of what the agency is predicting will result from the 8 percent bump in fuel economy.
Proposed flex-fuel mandates
Likewise, congressional efforts to create a federal mandate to require a fixed percentage of each carmakers' fleet to be flex-fuel capable would have significantly less impact on spurring demand for ethanol and other alternative fuels if car sales remain weak.
There have been several different proposals floated in both the House and the Senate in the past year, but, generally speaking, the mandates would require half of new fleets to be flex-fuel capable by 2012, with the percentage climbing in subsequent years.
Based on sales rates observed earlier this decade, the 50-percent mandate would put roughly 8.5 million new flex-fuel cars and trucks on the road in 2012, more than doubling the current number of flex-fuel vehicles in the United States. But at the current sales rate, the number of new flex-fuel cars and trucks would fall below 5 million in 2012.
Supporters of flex-fuel mandates argue that the technology is relatively inexpensive to add to fleet offerings and that an increase in the number of flex-fuel vehicles on the road will create the market incentives needed to spur growth of alternative fuel production and distribution, helping to break the nation's dependence on foreign oil.
But E85, the most common form of flex fuel in the United States, can currently be found at only 1,600 filling stations and is not available in five states, according to the Energy Department, leaving a lot of ground to cover for the nation to reach a congressional mandate to expand overall biofuel use to 36 billion gallons annually by 2022.
Conflicting government predictions
In the CAFE rulemaking, DOT acknowledged that current sales were well below the agency's sales forecasts but said the sales slump was only an aspect of the current economy, much like the current gasoline prices, and not a long-term indicator of the prospect for U.S. car sales. "Just as the agency currently expects fuel prices to return to high levels, it expects vehicles sales to rise well above today's rate," the agency wrote.
But Steven Rattner, the former Wall Street financier who is leading Obama's auto task force charged with restructuring the domestic industry, has criticized GM and Chrysler for basing their restructuring plans on overly optimistic sales rates. In plans submitted to Treasury in February, GM forecast 14.3 million new cars and trucks to be sold in the United States in 2011 and did not predict the total to exceed the 16.5 million mark until 2014.
Rattner has said that prior to the downturn, the industry was experiencing a car bubble – not unlike the housing and credit bubbles – and cautioned that sales would not necessarily return to the levels the industry had grown accustomed to. Even once credit markets begin to thaw, consumers and lenders will likely be more cautious, with the current economic turmoil fresh in their minds.
"You had a huge number of cars being sold, so I don't think it is prudent to assume the sale levels are going to go back to those levels," Rattner said in an interview with the Washington Post last month.