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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

 

When there is more than one parent or adult in the household, you do need more than one car. But it would be helpfull to let drill for our own resources and maybe even have trains, lightrails, trolleys and such. Put these car dealers and communists to shame. And would the US Government stop changing the the American Dollar for GOD sakes! Gas isn't high, the value of our dollar is dirt!!!!!!!!!!!

I would really love it if people who posted here could just spell correctly!  It's Lose, not Loose.  It's Definitely not Definately.  It's cater not cator. You're is a contraction for You Are.  You wouldn't use your when you insult someone by saying "your a looser".  It's much more effective in print when you write "You're a loser".  Geeezass people.  Instead of trading insults, get back to night class and take a couple of English courses.

As for vehicles,yes I believe we have far, far too many of them. But despite the liberal hippy hypocrisy going on, we'll never truly get rid of cars.  Auto unions are primarily and largely Democrat (not Democratic no matter what the Times says) voting blocs and no Democrat worth their tie dye is going to alienate a huge voting bloc like the auto unions.  So cars will never go away.  All this Green talk is really and truly smoke being blown up the anal orifice.  No Democrat is going to do anything about it except tell you to take the bus and recycle.  How many Democrat (and Republican for that matter) Congress people have given up their tax payer subsidized cars and (for some) drivers?

Yes, Liberals, that's right.  Your favorite Democrats in Washington ride to work in luxury cars, SUVs (John Kerry anyone) and what ever vehicle they choose and guess who gets soaked for the gas, driver and upkeep.  WE DO!    Added to that, why wasn't The Father of Global Warming, Al Gore, traveling the United States going to every single city that does not have recycling and public transportation(bus and light rail) and talking to their governors  instead of getting his boots licked at the Oscars by Leonardo DiCraprio?

Because he's a Democrat and he's not about to alienate the auto unions, that's why.  But he'll collect Oscars and Nobels for his hot air talking points all the while his various homes suck up tons of their own resources.  Don't waste my time with slop about "carbon credits".  That's just Democrat double talk.

Any by the way, since Leo DiCraprio spouted his liberal hippy spew about the "Oscars have gone green", just HOW did the Oscars go green?  Were the klieg lights made of new energy saving material?  Did the actors show up in Priuses, on their bicycles, the city bus or light rail?  Were the statues made of biodegradable material? Were the tuxes and designers gowns made here in the US and of cotton or hemp?  No.  Didn't think so.  So tell me... HOW exactly did the Oscars go green?  Because just saying you're green... doesn't make it so.

So when the high level, talking point spewing, in power Democrats want to Walk their Talk on oil, cars and the like, maybe I'll think of giving up my second car.  Until that time, what's good for the goose is sauce for the gander.  I pay for their car and I pay for my own.  I've earned the right to drive whatever the hell I want.

We're going down at an accelerated pace. Much faster than Rome. Now the almighty dollar's just a coupon though the new 5's are pretty. We don't import nearly enough cheap crap to anesthetize our youth whom believe Santa Claus brings it all. What to do?

A lot of you are confusing selling your second or third car which you ALREADY own, with NOT BUYING another one.

The author is saying that Americans will buy less cars, which will lead to greater use of public transport, greater investment in public transport, and eventually fewer cars. He isn't saying that you all have to go out an sell your cars immediately.

Even so, keep in mind that even if you specifically don't need or want to sell your car, many other people are doing so. There is a glut of used cars for sale right now, especially trucks and SUVs.

AS LONG AS PEOPLE CONTINUE DRIVING ABOVE THE SPEED LIMIT, GAS PRICES WILL CONTINUE TO RISE.

Having the inside line, 28 years in a automobile dealership I can tell you the influx of foriegn cars has hurt the US more than high gas prices. However our taste for 2 to 3 cars in the driveway has done it's damage also. Its not only autos the monopoly in the oil companies and not producing our own oil on our soil as well as coming up with alternative substitutes that actually work.

Just like someone pointed out here, reducing the # of cars per household will not help. I have seen couple doing that and they end up driving more while using the one car they have. It can only help if there is a good public transportation in place so people can actually cut back on driving.

THE POTENTIAL OF FINES DERIVED FROM DRIVERS NOT OBEYING THE TRAFFIC LAWS CAN PAY FOR MOST OF THE LAW ENFORCEMENT EXPENSE. BUT GOVERNMENT WOULD RATHER GET MORE REVENUE BY FEAR MARKETING TACTICS SUCH AS REDUCING POLICE PATROLS.

This is about as dumb of article that I have read in 20 years, American families may drive less because of gas prices but we still need to go different places at the same times. The next New York city writer who says Americans should follow Europeans with one car per family, or anything else that do in Europe please pack your bags an move to Europe ,and no I do not care to see any articles you write while across the pond, I have been to Europe many times but much prefer life here in Texas.

I hate everyone telling us we have to be more like Europe, We have more miles to covert to get anyware and dont have the great public trans that they do. In Europe you dont need a car, try driving a moped across Montana in January.

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