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New Study Suggests Auto Industry Slow To Bounce Back

Posted in auto industry, Car Buying, News by Kurt Ernst | May 19th, 2011 | 7 Responses |

Image: flickr user Emilio Labrador

If you listen to the automakers, everything is rosy with the United States economy, and we’ll soon be back to the pre-crash days of bloated stock portfolios, valuable real estate and affordable financing for purchases like automobiles. A new study conducted by Citi Investment Research auto analyst Itay Michaeli (and backed by research from R.L Polk) seems to indicate otherwise, and better reflects the reality that most of us are living in post-crash America. Per Michaeli’s study, Americans are scrapping old cars at a much higher rate than they’re replacing them, and that doesn’t bode well for continued growth in the automotive sector.

Since 2008, 2.1 million vehicles have been scrapped without replacement. Americans are buying fewer cars and families are cutting back on the number of vehicles owned. The study doesn’t cite reasons, but they’re obvious enough: owning a car costs money for things like maintenance, insurance and gas, and most Americans have little disposable income these days. Families that once owned a status vehicle or a sports car are now getting by without, and that fact is illustrated by the number of cars per driver in the United States. In 2006, the peak of the housing bubble, Americans owned 1.18 cars per driver; today, that number has declined to 1.14 cars per driver and Michaeli believes it won’t bottom out until it hits 1.04 cars per driver. That yields sales of around 14.5 million units in 2013, some 1.5 million units less than predicted by more optimistic studies.

I fall into the “fewer vehicles” category myself, and I’m actually looking to downsize further. In 2006 I owned a motorcycle, a sports car and a sensible sedan, while my wife drove a station wagon. Today, the bike is gone and we’re selling off the sedan and the sports car, to be replaced by a practical-but-fun hot hatchback. We’ve gone from 4 vehicles between us down to 2, and that doesn’t leave any room for further cutbacks. What’s your situation? Do you own fewer vehicles today than you did five years ago? In the next 12 months, do you expect to add a vehicle, stay the same or cut back on the number of vehicles you own?

Source: Left Lane News

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7 Responses

  1. BigRuss says:

    i know… the car sales bidness sucks now…

    • Kurt Ernst says:

      The primary reason for that? Most Americans are in a far worse place financially than they were five years ago (myself included). I know more people unemployed or underemployed than I know working, and those with jobs are in perpetual fear of losing them.

      I used to buy a new car every 3 years or so, but now I’m struggling just to pay the mortgage each month. There’s no disposable income whatsoever in our household, so buying a new car (unless we sell the existing ones) is out of the question.

      Here’s another tidbit: despite what you hear on the news, the situation is getting worse, not better. The bulk of the “jobs” added to the economy are in the minimum-wage service sector. Maybe I’ll move to Egypt, since we just gave them $2 billion to create jobs over there…

      Anyway, I’m off my soapbox now.

      • BigRuss says:

        im over worked and under payed… theres not many jobs in this military town and when you get one you fight like hell to keep it…

  2. Austin Schutz says:

    The auto industry as a whole may be slow to bounce back, but individual firms that meet market demands will have plenty of room to grow in the coming years. I still have a hard time taking Hyundai/Kia seriously just because of their past history, but I expect them, Ford and Toyota to expand market share in the coming years with the possibility of GM and Mazda gaining some as well. On the flip-side I think that Chrysler will continue to loose market share for the next three years or so and Volkswagon to loose a significant share of the market in the United States, but to continue to expand globally. Do I base these claims on anything? No, just gut feeling and impressions, but I am fairly certain that I have a good shot at being right.

    • Kurt Ernst says:

      Austin, thanks for the feedback. A year or two ago I would have agreed with all of your points, but here’s what I see today:

      – Hyundai and Kia are kicking ass and taking names. Cars like the Optima and Sonata aren’t just good, they’re superb. Even if you’re not in the market, go drive a Sonata and then a Sonata Turbo – you’ll be blown away by the value and the fit / finish. As someone once said, the Koreans are the only people the planet who make the Japanese look like slackers.

      – I had a lot more faith in GM immediately following their bankruptcy than I do today. Their employees are dedicated and hard working, but their senior management is falling back on their old ways. Out of the US big three, I’d be most concerned about the long term health of GM.

      – Chrysler is in the midst of a rebirth, but you can’t fix all the problems overnight. Their products, starting with the 2011 model year, will improve consistently over the next five years. I think the marriage with Fiat will prove to be the saving grace of Chrysler.

  3. PFULMTL says:

    It’s strange, I see more US companies gaining overseas designers (rebadging), while Korean companies gain domestic factories with Europeaon designers. Korean car (mostly Hyundai) will pwn in the coming years. They seem to be more active in motorsports lately too with recent track wins from Kia with the Forte Coupe, and entry into the rally events with the Veloster. The Hyundai Genesis is also a great comptetitive RWD platform winning over the Camaro, and sometimes the Mustang.

    • Kurt Ernst says:

      One of my press fleet cars this week is a Kia Optima, and I have to say it’s superb. It’s as good as any other non-luxury brand on the market, and the only other car that delivers as much content at the price is the Hyundai Sonata. How good is the Optima? I’d buy one if I needed a sedan.