Average age of US auto fleet at record 11.1 years

US auto Jun12.pngUS auto sales maintained a steady pace in May. As the chart shows (red square), they were 1.3m in the month, and are now up 13% versus 2011 (green line).

The key driver remains the need to replace old vehicles. It is impossible to work or shop in many parts of the US without a car, given the lack of public transport. And the average age of the auto fleet has hit a new record of 11.1 years. So owners simply have to replace their vehicles.

Equally, high fuel prices mean that buyers are trading down in quite significant numbers when they do purchase. Sub-compact sales are increasing rapidly – although the blog would certainly think twice about driving one on most US freeways.

The other driver is a loosening of credit standards. Credit agency Experian reports these are back to pre-Crisis levels, meaning more people are eligible for loans:

• Poorer people drive the oldest cars, and need credit to replace them
• Similarly, loan terms have been extended, to make repayments lower
• Interest rates at 4.56% are also helping those with good credit scores

In addition, of course, Japanese manufacturers are only now returning to the market with normal volumes, after last year’s tsunami disaster.

Even so, full recovery is a very long way off. Auto sales were still lower in May than in the 2005-8 period. And the annualised sales rate actually dropped to 13.78m, easily the lowest so far in 2012.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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