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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

 

That  option impossible for many families like mine. Two working parents, a working brother, I need to get to school, all of them to wok, and my grandfather does charity work which he needs a car for. Imagine all 5 of us living off of only one car. Impossible. Maybe instead of writing the useless articles, they could be out DOING something about it.

If you need a 7-passenger SUV to haul your kids and all their stuff, maybe you have too many kids and they have too much stuff.

I always wondered how all those families could afford a new car every couple of years for each spouse and a new car for each kid when they turn 16.  Some of those houses have so many cars that they look like a permanent party is going on.  Well, now I know... they COULDN'T afford all that stuff, and now they're losing a lot of it to repos and foreclosures.

Man, old Jed Clampett sure is a glass half full kind of guy, huh?

I agree with Tom; "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."  I wouldn't drive my 18mpg minivan if I didn't have 4 kid to haul around.  I would LOVE a minivan hybrid.

"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. "

Just pointing out that this makes no sense. Actually, the size of cars we drive would have no impact on the quantity of accidents. When the accidents happen their would be less damage and injury because of the formula mentioned (in simple terms a bigger object will cause greater damage to a smaller object). So The statement "there would be fewer accidents because of kinetic energy" is false unless it is in context of two objects being attracted by kinetic energy which in a vehicle in normal driving conditions is not the case.

Maybe what you mean to say Ben, is that accidents would be less violent and there would be less damage.

"Trucks and other larger vehicles should have their on lane. "

This is a good idea but has already been implemented. Here trucks have the center lane. The problem is that a big percentage of other vehicles do not stick to a constant speed. So trucks are forced to use other lanes. If you watch traffic on the Interstate you will see what I mean. You have basically three types of drivers In my opinion:

1. Trucks and people that use the roads for their profession.

2. Commuters, people that travel the same area almost everyday about the same time everyday.

3. People who only use the interstate when they absolutely have to. Retired people and kids who have not been driving more than 5 years fall here.

A big percentage of drivers do not realize that they affect other drivers so they drive way too fast or way too slow. (why not stick to the speed limit or 5 miles over> something consistent would be great!

They also refuse to let others by that are going faster,(putting in the passing lane) taking up the extra lanes and causing those faster drivers to use the right lanes (which is totally wrong BTW, if you pass on the right then you are asking for an accident) which include the truck lane and the regular lane.

So without totally building a separate highway just for trucks, you will still have the same yahoos messing things up for everyone else because they have no clue what’s happening around them and could care less unless it directly affects them.

This is what ruins your mileage even more than speeding.

The point that you are missing is that with low trade in values it makes sense to keep the older car and keep it for the miscellaneous odd job or while the other cars are being service.  I have a 96 Ford Ranger (small pickup) that was my main vehicle.  But I have bought a 4 cylinder Milan for commuting and keep the truck for odds and ends.  These are in addition to my wife's car that she uses to get to her work.  We in suburbia don't have a comprehensive mass transit system and need the vehicles.

who was the moron who thought this up?  I work and make money just the same as my husband, There is no way i am giving up my car.

Most American are iether missed informed, out of tough, or down right stupid. Those 10 seconds CNN gives you when talking about US or World problems are not enough for you to have a clear picture of what is going on. I watch several news channels from different countries.

I am living overseas and looking at this situation from a different perspective.

Politician cator to big oil corporations and our government takes action only when the situation is out of control. Look at this comming elections. The American public, is not demanding from our useless presidential candidates to talk and present a credible plan to fix our basic social problems like:

1) Decrease the demand for fosil fuels by regulating what gets on the road. Ban the big gas guslers. Americans, give up that SUV and Huge truck.

2) Make social security solvent. Remember? Was supposed to be a trust fund. Thanks  to our politicians I may not get my social security retirement after working all my life.

3) Make our incredibly modern Health care system available to all masses. It does not makes any sense to have the best health care system in the world, but, probably the most expensive. Learn from Canada, Cuba and some European democracies.( Health and education FREE) in most of those contries.

( Oh nooo... Politicians are not getting any money from BIG farmaceutical companies)

4) Force our politicians, thru out votes, to concentrate on social programs that improve our quality of life.

5) Change our election process to elect candidates thru popular vote, not thru electorate college (Rigged elections) or limit ourselves to two candidates. Most world democracies have eight or ten candidates during elections.

6) And finally. neither Mccain or Obama are fixing our problems. Wake up voters and smell the cofee. Stop making oil rich countries richer to our future's expense.

An American and Retired Army Officer/ war veteran living overseas.

People will have more cars. people like me will keep the pick up for hauling and four wheeling but buy an econobox to get to work every day. the same will be true for people who need an suv seasonaly or only when the whole family goes out together.

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