“Cheap, convenient mobility” the new trend for US auto markets

US autosa Jan13.pngThe US auto market seems to be at the start of a 3rd period of major change since 1950. As the chart above shows, sales have still not recovered to 1995-2007 levels. Equally, the key drivers behind the earlier two phases of development seem to be unwinding:

Post-war boom. Annual sales rose steadily until the mid-1980s. Demand increased as the US refocused on peace-time needs and its BabyBoomers (born 1946-64) began to reach car-buying age. In addition, the move to the suburbs, combined with the rise in the number of working women, led to 2-car households becoming the norm
Added-value sales growth. Market saturation then developed from the mid-1980s. Auto manufacturers responded by increasing average prices via the introduction of value-added features. Thus Ward’s Auto estimated in 2010 that the basic cost of a car had risen by ~$1k since the mid-1980s and safety costs by ~$3k, whilst “other content” costs had risen by $6k

Today, however, the Boomers are reaching retirement age, with 350k turning 65 every month for the next 18 years. So their need for new cars will reduce along with their ability to afford them. In addition, as the Pew Institute report there is “a growing preference for an urban lifestyle and amenities among Boomers and young adults“.

Major manufacturers such as Daimler are already adapting to this new trend. Its Mercedes’ Car2go car-sharing service allows US city-dwellers to rent 2-seater Smart cars by the minute, with one-way rentals, and also provide free parking. Whilst leading car rental firm Avis recently paid $491m to buy the car-sharing company Zipcar.

The key to success, as Mercedes have found, is to be market-focused rather than product-led. Thus the Transportation Sustainability Research Center at the University of California, Berkeley, suggest the key trend for the future may well be “the need for cheap, convenient mobility”.

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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