Carmakers across the board reported rotten December sales so I wondered: Have Americans fallen out of love with the automobile? Have they become more of a necessary evil as opposed to a status symbol or prized possession? Are consumers in increasing numbers viewing the gas-powered automobile as an expensive and environmental pariah instead of a technological marvel? Have we reached an automotive tipping point?
I ask this on the eve of the North American International Auto Show in Detroit where 50 new models are forecast to debut versus 58 last year. This year’s event’s all important press preview begins on Sunday and promises to be fascinating given the greater emphasis on electric and more efficient vehicles. The assembled will also question the viability of American auto makers whose malaise seems to spreading to foreign makers.
Last year, I was struck by Ford’s exhibit area which was dominated by large pickups and SUVs. You can bet that will be toned down this year especially with its sudden and bold challenge with hybrids. And Ford’s long-rumored Hydraulic Launch Assist for the F-150 pickup may also debut. That was first introduced at the 2002 Detroit Auto Show and then promised to increase truck mileage by 25-35%.
The easy explanations ascribe 2008’s cratered auto sales to tight credit, a slowing economy and the summer’s high gasoline prices. But now we know gas prices are not as big a factor as we thought given that the lowest prices at the pump in four years so far hasn’t coaxed auto sales back up. Cars across the board are more reliable, efficient and attractive so we can’t blame the automotive engineers.
That leaves tight credit and fear of the future. We will quickly find out if looser credit from the bailout of GMAC, GM’s minority-owned financing arm, will have an impact on auto sales. Of course, a combination of factors is conspiring to sink auto sales, but let’s return to my fall out of love theory.
A look at GM’s production forecast for the first quarter of 2009 compared to past years suggests something far deeper is going on in the consumer’s psyche than the usual explanations for sagging sales. The current slump warrants a deeper explanation than, for instance, GM simply having the wrong lineup of vehicles especially now that the declines for Honda and Toyota in December were steeper than both Ford’s and GM’s. I have maintained that GM has become the auto industry’s whipping boy and an easy target for politicians.
GM is projecting production of 1,303,000 vehicles in the first quarter in 2009. To give you an idea about the sorry state 2009 sales, the lowest first quarter production rate of the previous seven years was 2,005,000 in 2002. Something other than a sour economy has to be at work.
Here are my theories:
1) The transition between gas-powered, hybrids and eventually fully electric vehicles is leaving many consumers on the sidelines. Cars still have gas engines and if you plan to hold onto for 150,000-175,000 miles which is common today, you don’t want to be stuck with comparative gas guzzler in five years when electric vehicles are hitting their stride.
2) Cars don’t just last longer. They run well longer. They comfortably, safety and smoothly go straight down the highway at 150,000 miles and beyond. I have four solid vehicles with odometer readings of 203k, 93k, 87k and 51k and have no intention of making a move. Average age: 7.75 years. To me, the time to get rid of car is not just when the engine starts to go. Rather, it’s when the suspension no longer cushions the ride, the car pulls unsafely to the left or right, the steering gets sloppy or the transmission stops working crisply (Older cars pollute more, but that’s an another subject entirely). Another dynamic affecting new car sales is how Internet sites such as AutoTrader, CarMax and Craigslist have dramatically grown the used car market.
3) Driving a BMW 7 Series or a `vette doesn’t have the panache it used to — quite the opposite especially to the younger environmentally-minded generations. Kids coming out of college and burdened with loans could never afford an expensive car much less a house. When gas prices hit their stride again, econo-boxes (i.e. the European model) will take off again despite the 45% drop in Prius sales in December. December’s drop in small car sales hardly means bigger and thirstier vehicles are doing better. And, BTW, prices are creeping up again and just wait until the states and feds pile on more gas taxes to rebuild the nation’s crumbling infrastructure.