Will Auto Sales Stay Lower Because Better Cars Last Longer?

March 30, 2011

As most sentient consumers know, the car market fell off the cliff in 2009 and is only now starting to recover--slowly, haltingly, painfully. It may take several years to reach the level of 17-plus million vehicles sold in the U.S. just a few years ago.

Even worse for carmakers, the U.S. is essentially a mature market. Everyone who needs a car has one, pretty much, so the only long-term growth comes from population growth, measured in single-digit percentages each decade.

But another factor may be keeping U.S. sales down: Cars are far, far better built and longer-lasting than they were even 10 years ago, even if few of us are Irv Gordon, who's put more than 2.6 million miles on his 1966 Volvo P1800, or M. Allen Swift, who drove his 1928 Rolls-Royce for 77 years.

An article in the Detroit News about the many challenges facing automakers quotes Dennis DesRosiers, the president of DesRosiers Automotive Consultants, outside Toronto.

M. Allen Swift with his 1928 Rolls-Royce Phantom I Picadilly Roadster

M. Allen Swift with his 1928 Rolls-Royce Phantom I Picadilly Roadster

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He points out that new cars now have a life expectancy of about 250,000 miles, which hardly be said of the dubiously designs and slipshod assemblies passed off as cars in the 1980s and 1990s.

Since the start of the recession, the U.S. has been scrapping more cars than it sells, leading to the first decline in the overall vehicle population since World War II.

Yet that scrappage rate has fallen to about 5 percent of the total vehicle pool each year, from 8 percent half a century ago. With 280 million vehicles currently on the roads in all of North America--Canada, the United States, and Mexico--that represents 8.4 million new vehicles a year that simply aren't being sold.

Why? Cars are lasting longer. While lists of most and least reliable cars make headlines each year, it's often ignored that the entire scale is moving toward more reliable cars. Today's least reliable car is likely as good as the most reliable entry on the list from 15 years ago.

On the plus side, population growth in all three countries--but most likely in Mexico, which has a growing population and a much lower rate of car ownership--adds 2 million vehicles a year back to that lowered demand.

Should carmakers selling in the U.S. prepare for a future of slow growth? Yes. And they have, which is why so many are focused on the Chinese market, which totaled 18 million cars last year and will, by some projections, reach 40 million new vehicles a year by 2020.

Buick Envision SUV Concept, teaser sketch, Auto Shanghai 2011

Buick Envision SUV Concept, teaser sketch, Auto Shanghai 2011

Enlarge Photo

It follows that three weeks hence, some automakers will show their latest and highest-tech concepts in China rather than the United States.

They include GM, which today launched a teaser for its Buick Envision SUV Concept--a plug-in hybrid crossover--and noted that the car would be unveiled at the Auto Shanghai 2011 show, rather than the New York Auto Show that takes place at the same time.

U.S. market? Steady-state. China? Now that's a growth area. And that's how it is.

[Detroit News]

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