What’s The “New Normal” For Car Sales?

Courtesy of Henry Blodget of Clusterstock

In the middle of this decade, Americans bought 17 million cars per year (.8 per driver).  Now they’re buying 9 million (.4 per driver).  Detroit is terrified that Americans have discovered that they can get by on used cars, rental cars, and public transportation and that new car sales have been permanently hammered.

As with other sectors of the economy–retail sales, real estate, etc.–the most likely scenario is a “new normal” well below the peaks of recent years but above the current lows.  Some of the current paralysis is from fear about the economy rather than poverty or lack of desire.  But it’s also hard to imagine that each driver needs a new car every year.

So what’s the “new normal” for cars?  The chart below, from the New York Times, shows how cyclical the industry’s sales have been (until the last recession).  The crash in the oil crisis of the late 70s, leading into the recessions of the early 1980s, saw a similar decline.

Assuming the sales of the early and mid 1990s represent a non-bubble average, sales should eventually rebound to 14-15 million or so.

More from the New York Times >

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