The Real Reason Car Sales Are Falling

Discussion in 'In the News' started by ALS, Aug 3, 2017.

  1. ALS

    ALS Super Moderator Staff Member

    Vehicles haven’t been hitting the junkyard quick enough to maintain what had been a record pace.
    By Kyle Stock


    It’s been a tough few months in Detroit. After seven years of gangbuster sales, the U.S. auto market is skidding badly.

    The American car and truck segment is remarkably easy to get a handle on, but a look at some of its indicators may induce some head-scratching. For the past 20 years, the number of licensed drivers has ticked up by about 2 million a year (Uber and Lyft have failed to dent that). Likewise, the number of registered vehicles has climbed by about 3 million annually.

    Sure, there are aberrations, but given those numbers and today’s economy—with a strong labor market, relatively affordable financing, and cheap gas—it’s reasonable to ask why, then, are car sales tanking?

    The only real wild card in the U.S. car market is the replacement rate, which is to say how often cars and trucks make their way to the junkyard. This is perhaps where auto executives should have seen the slowdown coming. In the past two decades, about 13 million vehicles were dropping out of the U.S. fleet every year, far less than the number of new vehicles sold over the past five years. Customers keen to upgrade kept the market running hot for awhile, but that imbalance finally caught up with automakers. As more vehicles stayed in the driveway, fewer came off the lot.

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