Tuesday, February 10, 2009

Car Sales and the Future of Detroit

So, nobody is buying new cars these days. Well, about 40 percent fewer consumers are buying new cars and trucks to be more precise. There are burgeoning lots filled to the brim with excess inventories scattered across the country, and not just with domestic models. All of the world’s automobile manufactures are feeling the pinch as consumers in both the east and west tighten purse-strings and turn down the thermostat.

For those who were born before 1970 (or thereabouts), this pull back in car buying is not new news. It has happened before and it will undoubtedly recur in periodic fashion in the future. Of course now it is all hype, depression and talk of an irreversible economic collapse. I think this is silly on several fronts. First off, look around with eyes open and ask yourself if you see a depression? Are there homeless people pounding on your door crying for potatoes? No, of course not. Secondly, how many people do you know that unwilling out of a job right now? Come on, bring it on! Next, being pragmatic, economies always recover. Look at Germany post WWI. If that economy came back after being decimated, they any positive and forward looking society can make a come from behind win and prevail.

Back to automobiles. Now, if people are not buying new, then that would indicate an aging fleet of cars in the US and around the globe. The population is still on the increase here and elsewhere, so that should indicate increasing demand over time. As the fleet ages, quality used cars will have to fill the void and as this demand increases it would naturally follow that prices would increase as well. Once a point is reached where the used inventory prices compete with new models, the new models will start to fly off the lots and into drivers’ hands. Where that point is exactly, I do not know – I’m just talking trends here. I would opine to say that that point is not that far off. Maybe it is this year, or as distant as spring 2010. Either way it is not far off in the future. Believe in Gadabout. Believe in the truth.

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