Car Sales Tend to Rebound Following Recessions

Carsales Not everyone is shouting doom and gloom from the rooftops following GM’s bankruptcy. In fact, there are economists and other analysts out there who see reasonable signs for hope — not only for GM, but for the entire industry.

To understand why is to understand a pretty simple trend: Car sales almost always rebound strongly after recessions. People put off buying cars during periods of economic uncertainty, but as soon as that uncertainty begins to wither, what’s exposed is a pent-up demand for vehicles that people feel they’ve gone too long without. Check out these graphs at the blog Calculated Risk for a good visual explanation.

Because of the depths of the car-sale plunge during this recession, the rebound could be just as striking. Robert Gordon, a professor of economics at Northwestern University, sees the situation as being fairly simple: Because auto sales have dropped from around 18 million down to 1982-level lows of roughly 10 million, the car-buying rate has become “insanely low and unsustainable.” At this rate, he points out, the average car would have to last a buyer 25 years.

Could you go 25 years on your current car?

Gordon and Calculated Risk both predict annual auto sales to rebound as soon as next year to around 15 million vehicles. For the industry overall, this is good news. For leaner, less-burdened versions of Chrysler and GM, it will create an opportunity to sell a lot of cars.

How GM Could Rebound Sooner Than You Think (Atlantic.com)

By Stephen Markley | June 3, 2009 | Comments (6)

Comments 

Does this factor in used car sales? Because if many people exchange that same used car, 25 years of life isn't out of the question. And some people may be going outright carless.

Max

But what will the "rebound" look like?

Car companies rely on more expensive cars, with lots of bells and whistles, for profit. A lot of people went into hock bigtime to purchase such vehicles in the recent past. Quite a few used things like second mortgages to buy expensive cars. The loose credit of the recent past caused a lot of the economic problems we have today.

Will such loose credit return? It's doubtful. Will people take out second mortgages to get that $40,000 ego booster? That's also doubtful. It's the old "getting blood from a stone" thing. If the foregoing hold, consumers will be forced to go down market a bit. That would cut into auto maker profits.

If you look at the Japanese makers you see that they have all introduced subcompacts recently (Fit, Yaris, etc). Since these cars don't get much better mileage than compacts, I'm guessing that the makers are looking at vehicle cost to sell these things. Ford will shortly bring in the Fiesta for the same purpose.

The one big advantage for the more expensive, larger, cars, is perceived safety - one of the reasons for SUV sales in the past. That would be one big savings grace for more expensive cars, but it's unknown if people will give that up because they cannot afford, or get credit to buy, the more expensive car.

You could end up with a rebound in total unit sales, but a lag in profitability for auto makers.

DL

Max,

People will always need ego boosters (I don't claim to be different), and don't you every worry about car companies failing to come up with ways of making that "gotta-have-it" vehicle.

History repeats itself. It baffles me how people are so gullible to believe the media that somehow what's happening now is so unique and shocking. In less than 20 years we will yet again be outrageously wasteful.

Whether GM survives is not the issue. Once the economy rebounds, there will be another, or several, large automaker churning out products with ever-declining quality to make more money when opportunity allows. The institutions -- and individuals -- with money will always take advantage of money-making opportunities (nothing wrong with that by itself) and dress it up to appear like they're just trying to help the community and economy (which is very lame).

SVX

Really, because I'm sure we'll all rush out to buy a car from Government Motors. Ya know because the Russian Lada is such a great car.


Doesn't it seem strange that the UAW has givin part ownership in the company yet they work for all the competitors too.


And why did the Gov force GM to stop pursuing the Hydrogen car. The only emision is H2O. Last time I checked it's more damaging to the environment mining the oar to make the electric car batteries. Is it because the current administration is in bed with GE, just like the last administration was with Haliburton. HHHHHMMMMMMMM


Lets wake up people. Since when is is constitutional for a president to just take over a company w/o a vote from the people or congress?


Ok I'm done for now.

Car Sales Tend to Rebound Following Recessions. Carsales Not everyone is shouting doom and gloom from the rooftops following GM's bankruptc.mechanic jobs

In fact, u r producing a quality Product in the Market.. in the industry browser
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