Time was when US auto sales only rarely dipped below 1.1 million/month. Since the Great Recession began, however, they have only rarely been above this level.
Analysts are yet to take this change on board. So June’s 1.05 million figure (red square) was described as a ‘surprise’. Yet as the chart shows, most months this year (4 out of 6) have been below this level.
There are a number of reasons for this New Normal:
• With unemployment high, people think twice about buying a new car
• Cars today are more reliable, and last longer
• Consumers are thus now holding onto new cars for 63.9 months
• This is 14% longer than in 2008
Equally, of course, today’s higher auto prices also discourage purchases. The average car cost $30009 last month, up 3% from 2010.
Since 2008, sales have been in the 10 – 12 million range, compared to 15 – 17 million from 1995-2007. Their value to chemical companies has declined from ~$50bn to ~$35bn, based on the American Chemistry Council’s estimate of $3k worth of chemicals per auto.
This value should increase, as higher fuel efficiency drives greater use of plastics. But it seems unlikely we will quickly return to the SuperCycle days of sustained BabyBoomer demand.