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Americans own too many cars

Posted Jul 08 2008, 01:57 PM by Anthony Mirhaydari
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As $100 fill-ups become the norm and resale values for gas-guzzling vehicles plunge, owners of trucks and SUVs are getting a painful lesson in what economists call "demand destruction." In addition to switching from Ford F-150s to Toyota Priuses, rising oil prices may force Americans to follow Europeans with one car per family.

This would be the worst of all worlds for investors, since not only is the product mix shifting from high-margin truck-based products to lower-margin economy cars, but overall volumes would decline as well.  

Merrill Lynch economist David Rosenberg believes such a change is inevitable as drivers in the United States "totally change the way they live and move around" in response to gas prices. Consider that there are 40% more vehicles on the road than licensed drivers. Moreover, the average U.S. household owns 2.2 automobiles -- 10% more than in the early 1990s and 70% more than in 1955. So there is definitely a precedent for fewer cars per family.

One hope is that the lost volume could be offset by sales in emerging markets like China. After all, the number of cars per capita in China is at a level equivalent to the United States in 1915. Given its youth, plus generous fuel subsidies and rising incomes, the Chinese auto market is booming. First-half sales for both Ford and GM were up double-digits in what is already the world's second-largest auto market.

More specifically, annual sales of luxury cars and SUVs are up around 100%. As I discussed in a previous post on the popularity of SUVs in the Persian Gulf, traditionally American indulgences like three-ton Hummers are increasingly within the reach of those enriched by our great need for fuel and imported goods.

But this success will likely be short-lived. Those economies continue to depend on the embattled American consumer. And the subsidies enjoyed by the Saudis and the Chinese are becoming increasingly expensive and inflationary for their governments and their economies.

So despite the boom overseas, global car demand will eventually fall, further battering the troubled auto sector and its investors. Rosenberg thinks 50-100 million autos could eventually be taken off the road in the United States -- and I just don't see international sales compensating for a loss of that magnitude quickly enough. His advice: "Try adding some light rail to the portfolio."

Related reading:

GM sales up everywhere but here

The long, slow descent of GM

The death of the minivan (& Chrysler?)

(Disclosure: I don't own shares in the companies mentioned)

Comments

 

I believe that if most if not everyone drives the same or or close in size, in this case smaller cars for better mileage there would be fewer accidents because Kinetic Energy (KE) = 1/2mv2 or 1/2 mass x velocity squared.  So if a big car hits a smaller car, the big car would exert more damage to the smaller car since the big car has a higher KE.  Trucks and other larger vehicles should have their on lane.  This would avoid fatal accidents, and maintain higher gas mileage not only to truckers but as well as car drivers, because speed will be maintained at say 65 mph instead of an erratic speed that's up one minute and down significantly the next minute.  A uniform speed, especially in the highways is ideal.

Lastly, more mass transit especially monorails in inner cities and connecting cities that arrives and departs say every 5 or 10 mins.  This will encourage more people to do this more often, especially if security is maintained as well

Stupid article. Just because I have three cars doesn't mean I drive them all the time.

I totally disagree.  There is no way my wife is going to give up her car (I have tried for years) and I cannot easily commute to work via bus.  If anything, we have parked our SUV and we drive our minivan and commuter car.  We like the SUV because it is rugged for camping and the minivan hauls our 3 kids more comfortably.  I believe the first automaker with a 30 mpg 7 passenger vehicle (i.e. crossover or minivan derivative) will have a massive hit on their hands.  It will probably need to be a efficient 4-cylinder that can handle the highway.  If they can use some of the hybrid tricks to boost power for acceleration, it would be huge.

Well who gives a crap.  Like they have been stealing from the American Public for years.  I sure would like to kick them while they are down.  Just the same as they do the buying public.  No sympathy here.

>> Americans own too many cars

ORLY ? you think ?

The US would be so lucky as to just experience just an auto downturn. Nope....I see the world turning sour, as phoney US Dollars float around like autume leaves, while the King of the Jews,Greenspan & Co, is tied to a bumper and drug through the streets. Hoards of people, angry at loosing everything, looking for someone to blame. Millions starving like rats in the cities. Ahhhh yes....God telling us that there are just too damn many of us. And out of the ashes of civilization will come another civilization to repeat it all over again. Lets hope that they don't fall for representative government this next time, and vote on the issues directly. It is their only chance.

What a moronic message.  

Hitler thought everyone should drive economy cars, too.  VW Beetles.

Brain damaged youth need not waste their time writing such clap-trap.

Go drive a real car like a Bentley or a Rolls-Royce, Lincoln Town Car instead of a sh-tbox.  It's a free country swimming in oil with a dead-head Congress refusing us the right to drill our own resources.  Moronic madness!!!

American has to suffer this high gas price more severely...since there still are people who don't want to give up their second car. hey when are you guys going to give up high energy consuming life??

Yeah... having one less car is going to make me spend less on gas...

So instead of my husband driving to work, and me driving the kids 3 miles to the grocery store later in the day, with one car I would drive my husband to work, drive home, drive the three miles to the grocery store, drive back home, drive to my husband's work to pick him up, and then drive us all home.  That's gonna help.

I think I'll keep my second car.  I've done the one car thing before... there's a lot more driving involved when you have to drive someone to work and pick them up on days you need to go some place.

Greed of the few has caused the downfall of many... Integrity in government has all but diminished.

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