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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

 

Hi, My husband just left a message so it's only fair that I leave you with a simple but to the point statement. I am an economist that has followed "reasons" of economic downturns all of my adult life and I assure you THERE IS NO GAS SHORTAGE period. Americans are the most easily lead peoples in the world. They let others think for them and to speak even more frankly, don't have the backbone to change anything.  Selfish, egotistic, legalistic and brainwashed. Likewise, we ARE NOT in the economic trouble you may think. Need I remind you that we have welfare recipients that live better than the middle class in most of the world? This is a fact so believe it. Use your heads. Wake up and smell the coffee.   I'm not against Obama anymore than any other politician but remember, politics is a world stage and they're all actors. This year he won the academy award. He's a professional speaker and damn good at it. He didn't rise from nothing to stardome on his own merit. He owes SOMEONE. If you keep your ears and eyes open and use what God gave you in intelligence, you'll learn something

Well I part of a family that put two comments in so it's my turn now. I'm a teacher at the local college so you know I'm not in the upper income bracket. I'm just an average citizen like most of you.  #1- What is happening now is not any different in concept than it has always been. People make bad decisions and the rest of us pay for it. #2-  People don't work together. Start driving cars except when you have to and prices will come down. Also stop buying new cars. Fix your old one up. Don't tell me it doesn't make sense. In most cases it does. They did it in the old days and cars were nowhere as dependable as they are now. Oh, it costs more today you say. Listen up bummy. My father worked for $0.80 an hr and paid CASH for his 1951 Chevy. It's called discipline. #3- Throw away your credit cards and save just a little every pay day and when the bad times roll around you'll be able to make it through. Don't tell me. You can't do it nowadays, you need 2 cars, the wife has to work. Again, all bunk. It's discipline. Need I once again remind you? My father never made more than $23,000 per year in his life and retired a millioaire. But guess what he did most of you probably don't? He had to give up a few things in his life. Wow, what a sin, huh. Are you so needy or greedy to think life owes you, on a silver platter? Usually when you get one thing you have to give uo another. It's a life of choices, but you want it all. Spoiled brats. I speak from experience. I raised 6 children, have never made a big salary, my wife never worked, believed in God (oh, you mean I have to put Him in my life?), didn't own a home until in my 30s, still went on vacations, and have some beautiful memories.  Oh again. Did I forget to say I never had a credit card until I was older and then it was only $1000 for emergencies?  I was taught if you can't pay for it, you don't but it. It smarts sometimes but it builds a good frame of mind. Hmm. Wonder what I did wrong. Maybe it was attitude. By now, I'm sure I have the majority of you mad ,which doesn't bother me in the least. Some of you are legalistic fools. This world owes you nothing. And THINGS are not what makes a good family. You do. Quit putting the blame for your bad decisions on everyone elses shoulders. You put tourselves where you are so now you'll have to deal with it, and if you believe you can make it, you will. You really will.

Well, here I am. 4th in the family. Mine is not as long winded. You have just given we readers  an article on changing our life style. You should have targeted our corrupt goverment instead. If they made cars (and they do) that got 200 mpg gallon we wouldn't have to worry about anything you mentioned plus it would help the ecomic status of families. It would also take away the need for polution control helping gas mileage even more.  In the Minneapolis paper years ago they focused on a 1965 Ford that got 200 mpg and told what he did to get that mileage. That's the last that was heard. Many other instances have also happened. A friend of mine has put together (definitely not the 1st person) a system where he uses 100% water to propel his vehicle. We put a man on the moon and have captured laser. Do you mean to tell me that you have never thought of this? If this is the case, I think you should have gotten a job as a factory worker. It would be more honorable than deceiving people with the words you have written in your article. There is an old Chinese proverb to describe your articl. "It is better to keep your mouth closed and be thought a fool, than open it and remove all doubt."

I have to start out with, this author hasn't a clue what he's talking about. College boy has a degree between his ears and degrees don't think. This country's growth was built on non college people that used good old common sense to make decisions. Dreamboats like this use charm and wordplay to get their message across usually to the mass of non thinkers. This whole problem is a matter of simple mathmatics. If you spend more than you make, you're going to have a problem. For crying out loud people on welfare even have credit cards, they buy t-bones instead of hamburger, etc. Of course that's usually why they're in the position they're in in the first place. I know people that have made a lot less than some welfare recipients and haven't needed help. Don't give as much and they'll learn to adapt. It's called survival. Goverment is also guilty. They keep telling us they have to raise taxes, but why do percentages have to rise? If things cost twice as much and we make twice as much wouldn't the percentages remain the same? Oil prices are high. Why. The oil is free. The whole dessert is full of oil and cost only the refinery costs. The land is theirs. American politics, wake up and get tough. There isn't a problem that can't be cured normally easier than what we go through. Politicians? When a president can stand there ans face us and say we have an oil shortage problem I know he's nor stupid enough to believe this so I automatically classify him as a liar. Get rid of corruption and everything else will sail smoothly. This is nothing but a playing field and no matter what they TELL YOU they're solving, another one will come up and another game will begin. Stimulas Plan. Ha! What a joke! somebody's going to get real rich on this one. Look at some of this bunk with your heads and get your heads out of your butt.  We taxpayers are paying through the nose to bail people out that weren't qualified to get a loan in the 1st place. That's of course after we bailed out bankers that didn't know what they wwere doing.

How many cars you have, have nothing to do with how many miles you drive.  This is especially true for the majority of the country that don't have a good public transportation system.  I am single, and have 3 cars.  I can only drive one of them at a time, so it in no way affects my gas bill.  

How about the guys that own hot rods and custom cars don't think they will give them up I want

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