In part due to the American people adjusting to the higher gas prices and in part due to the state of our economy and the slowly swelling job market; the auto industry will be driven by it’s consumers in 2007. New car sales have been at steady highs for the past few years, and after every high sales wave there must follow a trough of market saturation.
The driving force
One of the main driving forces behind the automobile industry is quite simply the price of oil. The hike in the price of gas changes the way consumers view their transportation. Unnecessary consumption is eliminated, and people are leaning towards more compact cars with smaller engines when they purchase. That said, most of the automobile purchases made in 2007 will be used cars, not new ones.
Infact fuel prices are projected by Mustafa Mohatarem, chief economist for General Motors Corp to stay rather static, and perhaps even go down a tad. A prediction shared by Van Joilissaint, chief economist for DaimlerChrysler AG who believes that the lower gas prices will urge the truck market back up to speed and show increased demand.
Sorry Detroit, but at the North American International Auto Show well respected economists such as Paul Taylor, chief economist for the National Automobile Dealers Association predicted flat sales for the new car market in the coming year.
Used dealers have a higher range of flexiblility than the manufacturers do, they can more easily fluctuate to accomodate changes in the market.
Heightened availability and the longer life expectancy of modern vehicles means that there are more quality used cars on the market. People will respond to that by buying better and higher end used vehicles this year.
Following market and gas price trends the used car dealers have the availability to meet demand by marketing what sells at any given moment. The readily available slew of pre-owned cars in todays market sees to that.
Adjusting to the higher gas prices has driven the American people, and Californians in specific, to gravitate towards more fuel effecient vehicles. This in turn ensures the success of the market for used 4 cylander compact vehicles in ’07, a market that has already made a marked incline at the close of 2006.
Inversely if GM’s chief economist is right in his predictions, the coming year could prove to be not just the Year of the Used Car, but the Year of the Used Truck.