Will new car sales ever go up again?
NYTimes has an interesting article on this point here .
With government effectively owning 70% of GM – the issue of whether Americans will buy new cars at rates they were buying before the recession has a lot of ramifications to us as tax payers. It is, after all, our money that is financing the company.
We have two schools of thought:
- Because of economic uncertainty, people have been driving their existing vehicles longer than ever. They have been putting off purchases of big ticket items like cars, suvs, etc for a while now.As confidence is restored and normalcy returns to the main street, there will be a lot of pent up demand for vehicles. With lot of costs having been dramatically shed especially in US automakers during this re-organization – it should mean real good profits for the companies and ultimately a return on money for us as share holders.
- The recession has changed the normal pattern among consumers. The longer they are in this recession the more unlikely its it that, they will go back to old ways of consumption.Americans have for first time turned to being savers. Despite horrible interest rates the savings are going up every passing month. Baby boomers, the biggest group in the car market, are entering retirement age after a bad financial shock.
The point being its not going to be like good old days.
Our take is that, there will be a slow bounce from current rate but it will not return to old rate for a long time, if ever. Here is the graph of total American sales of GM and Chrysler for some prescriptive on just how severe the drop in sales has been.
From used car angle , people are going to be taking better care of their vehicles, drive them longer than before and the values on used cars are going to remain strong for a while to come.
We are also noticing rather quick action at our sister site – PreOwnedBike.com , especially when it comes to scooters (something we have not noticed that much before).
Agree or disagree? Leave us a comment…
(Image used in showcasing the article is courtesy of Wikimedia, SteelCityHobbies .