Posted on 10/30/2019 10:03:12 AM PDT by Vigilanteman
Key Points
•Auto sales have crashed, the unsold inventory and delinquent debt may worsen well into 2020.
•This auto-led downturn may be less damaging to the global economy than the housing bust was 10 years ago, but automobile manufacturing still accounts for a sizable amount of production, debt, and jobs.
In 2009, the world economy was starting to climb out of a housing-led downturn. Ten years later, a downturn in auto production following tumbling car sales is driving a bust in manufacturing and threatening a recession for the global economy. This auto-led downturn may be significantly less damaging to the overall economy than the housing bust, but is no minor threat considering the amount of production, debt, trade, commodities, and even jobs tied to the making of automobiles. The auto inventory and debt hangover may last well into 2020.
Manufacturing-led downturn
Manufacturing output has slowed sharply around the world, slowing overall economic growth. This can best be seen in the resulting drawdown of excess inventories acting as a drag on economic growth.
(Excerpt) Read more at schwab.com ...
Those kinds of vehicles are not only cheap to build and buy, but they are exactly what a lot of people actually NEED in a pickup truck.
Of course, the Cafe standards didn’t apply to pickups, so they are not all that safe. But, I’ve never cared about accident survival. My primary goal is accident avoidance.
There are too many federal safety regulations that drive the price up. Electronic stability control, anti-lock brakes, side-curtain airbags, etc., etc., etc.
25%+ of 16-25 year olds do not have a drivers license. They use Uber and Lyft.
Young folks have crushing student loan debt and cannot afford a $30k + vehicle. 50% of the population are poor or heading that way
Peter Luft ex GM CEPO said in a letter last year in 12-15 years privately owned cars will be rare due to cost and self driving cars that will pick you up and drop you off.
If they stop putting the most expensive, latest technology into new cars and go back to simpler machines at lower cost sales would skyrocket.
But I guess that doesn’t help fund union benefits and pension plans.
I love my quad cab Tacoma bit is overkill in some respects for burbs guy like me.
No one wants to pay the astronomical price for a new car or truck when the world is going to end before the rig is paid off.
“There are too many federal safety regulations that drive the price up. Electronic stability control, anti-lock brakes, side-curtain airbags, etc., etc., etc.”
Nanny state soccer moms would never buy a vehicle without those options.
“I’m about to rebuild the engine. “
I have done this on antique vehicles. But modern cars have scads of connectors that disintegrate when you take them apart. On my Ford, you had to disconnect harnesses that ran over the engine. Smaller cars with engines mounted transversely are extremely hard to work on unless you take off the fender wells and fenders. Way more work than I want.
So, what is it you are rebuilding? (I have a ‘48 Plymouth with a flat 6. A ‘56 Studebaker with a 289 and a Mustang with a 289. I won’t touch my modern stuff.)
What crash in auto sales? They’ve been very steady, neither forming a bubbling nor declining. Although now that he brings it up, auto sales were crashing before the last four recessions (at least). So the lack of a crash may be very good news.
It’s not only the automakers, it’s also the regulators. Look at all the content a car MUST have these days - ABS, yaw control, rear view camera, air bags, the list goes on and on.
exactly- when a new truck costs about 1/2 the price of a new home- things have gotten out of control
Back in the day- a house- average, nothing fancy- cost about $30,000, a new V-8 truck, loaded, cost about $4,000-5,000 or so
Today an average, nothing fancy house, in many places, goes for about $150,000 (No, we’re not talking city prices- country prices only here), and a new V-8 truck, loaded, runs about $60,000-$70,000
in the past 17 years, alone, prices have doubled- A lot of it due to enviro regulations, computer technology, and creature comforts- unfortunately we’re regulated into buying trucks that now cost 1/2 the prices of a house in rural areas because of it- years ago a vehicle was roughly just 1/6 the price of a house or so-
“A well-optioned 2001 Ford F-150 Crew Cab 4×4 had an original MSRP of around $34,000. A 2008 Ford F-150 Crew Cab 4×4 Harley Davidson edition moved up to an original sticker price of over $40,000. The latest 2018 Ford Raptor Crew Cab can now be optioned at around $72,000. The price of a fully-loaded F-150 has approximately doubled over the last 17 years. Clearly, this is more than just dollar inflation. Inflation accounted for about 28% of the price increase over the same period.”
https://www.tfltruck.com/2017/10/new-pickup-trucks-expensive/
[[I drive it to church to keep the seals alive.]]
animal lover alert!
“I miss the Chevy LUV.”
My shop teacher in HS back in the 70’s had a Chevy Luv. It was maybe 3 -4 years old if that and you could put your hand through the rust hole at the top of the fender.
Great little truck though black, 4x4. Truck went anywhere.
But gawd they rusted out worst than a Vega
The reporting of world economic statistics in aggregate is being used to depict a looming recession in the United States which has quite frankly uncoupled from world trends with the advent of the Trump administration. The economy is doing quite well in the United States. The only bellyaching is coming from those states with housing bubbles being judiciously pricked before they got out of hand again, by the SALT deduction cap on federal deductibility of state property taxes on residential real estate. Consumer demand is strong, job growth is strong, housing sales are strong in those areas that are not in bubble territory. Don’t fall for the doom and gloom of cherry-picking statistics that do not necessarily apply.
it almost makes sense to go to classic car auctions these days- yes, the gas economy isn’t as good, but the vehicles are much simpler to work on, cost a heck of al to less than new cars today, and look great with their classic styling in many cases-
There are some definite drawbacks, but all in all, buying classic might be a wiser financial decision in the long run (IF the car is sound mechanically)
Even the "mini-trucks" they are starting to produce (Ranger, Dakota, Toyota, etc.) are about the size of the full sized 1/2 ton trucks they were producing in the 90s.
The technology in new vehicles today, along with regulatory and emissions requirements and mandates are driving costs of all vehicles up. Some of that is consumer demand. But the more variants and packages that OEMs offer dilutes and sometimes diminishes profit opportunity across a vehicle platform. So they try to standardize for what will sell the best and and meet regulatory standards.
The industry is stuck in the middle of a technology shift with their pursuit and investment into electric vehicles, technology, safety and emissions standards. The consumer base is all over the map as well. A lot of manufacturers are trying to reduce their offerings to focus on consumer demands so they can increase volumes of fewer lines.
I think there is also some saturation as a result of the economic improvement and consumers upgrading in the past several years. There are a lot of reliable used vehicles being purchased as they are now available on the market in a large quantities.
[[The hard truth is that the automakers have made new cars too expensive.]]
Enviro Regulators have added to it- but yes, automakers too- they make a front end all plastic, not i n sections, but one whole piece, so that if you get a crack, you end up having to replace the whole front piece- no more small sections that can be replaced independently- and cost much less-
Heck- a humble key now costs 100’s of dollars to replace in some cases- AND you only get a limited number of keys, once you have to exceed that amount, you have to have the whole darned anti-theft ignition mechanism replaced which is quite expensive!
I had a key made not long ago for an old car, no fob involved, no chip involved, and it cost me a whole dollar! Today that key is anywhere from $50 to a few hundred depending on car-
(I have a ‘48 Plymouth with a flat 6. A ‘56 Studebaker with a 289 and a Mustang with a 289. I won’t touch my modern stuff.)
I have a 65 Mustang I’m doing. High end build. Worst decision of my life. Can’t stop and can’t sell it or lose my shirt.
$70k so far just in molding in under carriage, engine compartment and preliminary body work-700 hours so far at a professional shop. Car is not even painted yet. I originally figured $100k to build will have $225k easily. Went overboard. I’m a stupid Perfectionist redoing work etc
It will be nice when done. Glad I have an understanding wife with an equally expensive hobby - horses.
The GM strike was to hide the 70 day inventory they entered it with. Now the expenses will be rolled in with the strike.
They used to use Strikes to re-fit the line.
None of this has to do with “the worker.” It’s a way to keep the charade going.
The market is turning to leases, so for most people buying a car is so 1990. Those leasing only care about the monthly nut. The total cost becomes irrelevant.
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