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Automobile industry

The Future of American Car Sales: A New Normal?

Strategic Insights

— 2 min read

In recent years, American drivers have shown a preference for buying new cars, fueled by home equity loans, easy credit, and cheap short-term lease deals. However, the market has collapsed by 46% to below 10 million in sales, leaving the industry to debate the new normal. Some believe sales will rebound once the recession ends, while others think Americans will rethink their need for new cars. The answer will be crucial to General Motors and Chrysler, which are receiving federal aid. The Treasury Department's advisers now expect annual sales to be around 15 million in five years, still below the peaks of this decade.

Key Takeaways:

  • The auto market has collapsed by 46% to below 10 million in sales, and there is no clear indication of when sales will rebound.
  • The Treasury Department's advisers expect annual sales to be around 15 million in five years, still below the peaks of this decade.
  • People like Kate M. Emminger are opting for alternatives such as car-sharing services and public transit due to high monthly payments.
  • Baby boomers, who make up the largest group in the car market, are beginning to retire and are buying fewer cars.
  • Home values have decreased, making homeowners less likely to use home equity loans to purchase new cars.
  • The shift towards car-sharing services like Zipcar is significant, with over 300,000 members, up from about 200,000 a year ago.
  • Donald Grimes, an economist at the University of Michigan, is forecasting the lowest sales for the driving-age population this year since 1970.
  • The decline in sales has spooked the industry, with Toyota's group vice president, Josephine Cooper, calling it "very, very sobering."
  • Car-sharing services are concentrated in urban areas and college towns, where owning a car can be burdensome and expensive.

Sources:

  • Bureau of Economic Analysis
  • MotorIntelligence.com, R.L. Polk
  • Autodata Incorporated
  • The University of Michigan
  • The New York Times

Statistics:

  • New-car sales have collapsed by 46% to below 10 million.
  • The Treasury Department's advisers expect annual sales to be around 15 million in five years.
  • The average number of vehicles sold per driver in the United States has dropped from 0.76 in 1970-2001 to 0.4 in recent years.
  • Zipcar has over 300,000 members, up from about 200,000 a year ago.
  • General Motors has received about $20 billion in federal aid.
  • Chrysler has received about $10 billion in federal aid.
  • Toyota lost $7.1 billion in the first three months of the year.

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