Where the Cars Are
- Posted by ryan on June 1st, 2009 filed in Economics
Felix has been making some sound points about potential long-run trends in the American car market here and here (see also). The bottom line? It sure seems as though the number of vehicles purchased per household is destined to decline. Americans will buy fewer cars, smaller cars, and own them longer. That spells deep trouble for automakers dependent on the American market. But in making his point, I think he reveals a deeper dynamic, that may well do more to shape automaker fortunes:
Still, check out this league table: the US has vastly more cars per 1,000 people than any other major nation. Canada, for instance, has only 563 vehicles per 1,000 people — less than three-quarters of the US figure. For America to even approach that level would be unprecedented in living memory, but there’s really no particular reason why the average American needs 36% more cars than the average Canadian. If you’re losing say 15 cars per 1,000 people per year, it would take over 14 years to get down to Canadian levels of car ownership.
He’s explaining how absurd American levels of car ownership are, and he’s right. But check out that league table. Even a very progressive, transit friendly place like Denmark has 408 motor vehicles per thousand population — a low rate for a developed nation. Meanwhile, Brazil has 81 vehicles per thousand people. India has 12 per thousand people. And China has 10 per thousand people. Yes, American consumption rates are likely to approach the upper range of the other developed nations, but so what? If Brazil, Indian, and Chinese rates of vehicle ownership get anywhere near the lower end of the developed nation range, then we’re talking hundreds of millions of new automobile sales. This relates directly to the point I made earlier today concerning oil prices — it’s not about us. I’ve been known to worry about excess automobile capacity in the past, but I’d worry about it more if China weren’t so busy building highways.
June 2nd, 2009 at 2:05 pm
The core and kernel of First World economics and not one comment! Well, there you have it.
And yet, you can see this mindset in almost every American. China (or Brazil or India) will become more prosperous and people will want to own cars and live in suburban homes. We clutch greedily at news that the Chinese are buying cars or that the Indians are making an especially cheap model that will swamp their road system. We now have a major public share in our automobile industry, as do the French, the British, the Italians and the Germans.
The truth, meanwhile, stares us in the face. Most of the people in the world will never own a car and will never even want to own a car, any more than I want to own a jet ski or you want to own an airplane. They won’t build freeways or forge millions of tons of steel into bumpers or suck their aquifers dry watering suburban lawns.
Stick a fork in it, it’s done. A new age now begins.
June 6th, 2009 at 11:01 am
Very astute remark. Glad you see that it is not all about us.
June 6th, 2009 at 11:29 am
Even as these countries modernize, it’s difficult to see them adopting the same lifestyle as Americans. The sprawling suburbs and exurbs are truly a North American novelty, created by a low population relative to geographic area.
Couple this with the rise of the mega-city, and traditional American-style autos are not only too much car, they’re simply impractical.
Expect instead sales of tiny cars, and more “two wheel” options. If places like Mumbai and Bangalore can develop thorough mass transit systems, they can even keep those things to a minimum.
June 6th, 2009 at 2:14 pm
Of course several things will determine future rates of ownership- the first being the cost of fuel. Even in the rosiest scenarios there won’t be enough hybrids, plug-ins, etc available for many years and will there be enough raw materials for all those batteries? Public transportation will continue to grow. Second, vehicles are lasting longer- even the cheapest car (hello Kia Rio) bought today would outlast my first car- the lovely 1983 Chevy Celebrity, which, by year 10, had every part replaced on it including the headliner and power window motors (I won’t get into engine and transmission- too many parts to list). Finally, people will become more urban because suburban living will continue to get expensive- in another year when interest rates get jacked up to soak up excess liquidity how high will the average mortgage be? Not many people going to be buying 300K houses at 10+% interest.
June 9th, 2009 at 7:03 am
Hm. Sounds like the predictions that everyone would have a jetpack by 1990.
I pass dozens of homes near the Huntington Metro with 3+ cars in their driveways. They usually include one “nice” car, one junker, and a pickup truck/van. These are group homes where each resident usually has their own car. One place has FOUR cabs in the driveway. And wasn’t there an initiative to keep people from paving over their front yards to make more parking spaces? I agree they’ll probably stick with the junkers as long as possible, but these people were doing that before anyway. Maybe Joe and Jane Sixpack won’t lease a new Camry every 9 months, but greater migration means more of what we’ve seen before, not less.
Immigrating to the Promised Land means doing things bigger. Bigger homes. Bigger yards. You abandon your healthy legume and vegetable-based diet in favor of more protein and the luxury foods you couldn’t afford back home, contributing to the rise in obesity. And of course you get the auto-dependent lifestyle. It also means a big goddamned car instead of that scooter/shoebox you drove in Bangalore.
Yeah, it’s a “new age” now, but predictions of the death of private transit are greatly exagerrated.