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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

 

What are all we working mothers suppost to do walk and drag 6 kids to daycare at 6 am. No way am I giving up my SUV. I need a large car to hold all of us.

We presently own three vehicles. I am not a tree hugger or an enviromentalist be any means - but I try to do my part. Our children will have to live in the world we leave them. We own a VW Passat, an Audi A4 Avant (wagon) and an older (97) Nissan Sentra. These are three econimic cars. Each is five speed and both the German cars have four cylinder turbos. I wish more people understood how great turbos are, and thus making them available in more cars. Turbos give you great gas mileage when driven properly, but still allowing for an awesome boost of power when needed (for passing and such). I also wish more people would drive standard so there were more available. VW stopped making there Passat Wagons in five speed this year because of lack of sales (thought the will be coming out wwith a six speed Turbo Diese Passat Wagon in 2009)l. We get about 35 hw mpg on the Nissan, 31-33 hw mpg on the Passat, and about 30 hw mpg with the Audi - despite the fact that it is AWD. Of course with the rising gas prices we have been driving the Passat and Nissan, while only driving the Audi when we have to buy something big or bring the dogs somewhere.

American is a fairly new country and could learn from the Europeans who drive much smaller cars, many in standard and have many more turbo models. We are a country filled with selfish people wtih out much common sense. Keep demanding these SUV's and they will keep making them. Develop a more European attitude and cars such as Audi, VW, Volvo, Saab - will be more in the norm, thus lowering their prices to be more a more affordable everyday vehicle to the average American.

In Europe they drive more than one car per family.  I am originally from Rome, Italy and the traffic is so umberable.  Young people drives scooters but than again the streets are all too small and scooters is not a problem.  In America the streets are too large for a scooter.  They also have the best busses routes available to all.  In Europe you do not need a car to travel.  In America you do.

Just curious what planet is the writer of the article on?  "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."  well lets think about the above numbers.  IN 1955 most women didn't work.  In the early 90s parents who were working and could afford it got used cars for their kids.  So tell me who has to change?  

Uncle Jed,

The next government will most likely be a dictatorship.  People in America aren't even taking an active role in the republic now.

Hey Jed Clampet America has the money it has because of representative government and capitalism. Take those away and all we will have is another third world country with over 300 million people in it.

Just what the radical left would love: getting the public to go to smaller cars, depend on public transporttion, cluster in the cities, and give up the privilege of going where and when they want. Maybe when we're reduced to the level of some third-world country and they rule all, they will be satisfied.

This article is stupid.  Average household has 2.2 cars. 1 for me, 1 for my wife. I travel for work, she goes to and from.  I dont have too many cars, i have just enough. How many cars does the author of this article have?   WHAT AN ASS

My neighborhood near Dulles Town Center, VA has tons of cars but no sidewalks. I see moms pushing their strollers on the side of the street because of the lack of sidewalks. They don't even have a shoulder. Imagine a large SUV sharing a lane with a stroller... Kids get run over going home from the pool because the right turn signal turns green exactly the same time the Walk symbol lights up. The county needs to spend more time encouraging and protecting pedestrians. Right turning cars should stop and look for pedestrians especially kids.

Ha, one car per family.  Not likely.  Most people have always try to find ways to save a little cash on gas and maintance.  That is not going to change.  Have you sold your car for a little scooter yeat?

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