Tuesday, February 7, 2012

How Auto Sales Could Slow Further

In the discussion surrounding the release of auto sales reports last week, I saw a surprising degree of denial about the changing role of cars and trucks.

The United States’ average vehicle age set another new record high. Soon, the conventional thinking goes, the age of vehicles will force owners to buy replacements, and then, new auto sales will return to familiar levels.

But that doesn’t have to happen. First, the long-term trend toward longer vehicle life isn’t about to make a U-turn. Vehicles will continue to last longer. Second, it is only the owners of vehicles at the end of their useful service lives that face any pressure to replace. That isn’t nearly enough vehicles to lead to a detectable surge in sales. Third, the replacement vehicles don’t have to be new vehicles. If someone is ready to scrap a 1986 pickup truck, a replacement from the 1998 model year might seem new by comparison, but it doesn’t actually count as a new vehicle sold. And finally, it is only when business is booming that the hassles of maintaining old equipment get on managers’ nerves. When business is slow, there is more than enough time to get the latest repairs and maintenance scheduled. The worry is not about how much time it will take, but about how much it may cost — a focus that rarely favors scrapping a vehicle. The number of places where business is booming is, again, not enough to create a boom in sales of equipment in general, or automobiles in particular.

Automobiles’ replacement cycles may be changing faster right now because of financial stress, but that doesn’t mean the economy will improve and those changes will reverse. When people learn a new, more efficient way of doing something, they often stick to it even after circumstances offer them more choices.