Bloomberg can't understand why auto sales are falling
It's actually pretty simple: median income isn't even $50K!
One of the huge problems with the auto industry is that the industry itself is trying to turn a basic necessity for transportation into a luxury. As a result its no wonder that sales are dropping.
Me? I don't need the fancy trimmings. Give me an old-fashioned carburetor, manual transmission, manual door locks and windows and I'm fine. I don't need an in-dash GPS, back-up sensors, or 80 computers monitoring the temperature of my seat.
One of the huge problems with the auto industry is that the industry itself is trying to turn a basic necessity for transportation into a luxury. As a result its no wonder that sales are dropping.
Me? I don't need the fancy trimmings. Give me an old-fashioned carburetor, manual transmission, manual door locks and windows and I'm fine. I don't need an in-dash GPS, back-up sensors, or 80 computers monitoring the temperature of my seat.
The tire pressure monitors are Federally mandated. Computers, fuel injection, overdrive transmissions, expensive light weight materials. start/stop engine programming, etc, are all a result of Federal gas mileage standards. Air bags and the sensors and computers needed to operate them, are in cars because of Federal passive restraint regulations. Back up cameras and stability control systems, are also required by Federal law. The Federal Government even has standards for the level of "reflectivity" of interior surfaces!
Many of the extras in cars are there, because the computers needed to handle all of the Federally mandated crap, have plenty of excess capacity, so the auto companies might as well use that capacity. If you have to put a screen in the dash for the back up camera, you might as well add nav and a high end sound system to it. The cost of nav systems have halved in the last few years, because cars already have the screen in the dash.
Making things like power windows standard, actually brings the cost of them down. It eliminates the need to engineer, manufacture and stock parts for both power and manual windows.
Bing, bing, bing!! We have a winner!
My simple basic 07 Ford Ranger with 200K on the OD... suits me just fine...
Unaffordable
Used
Uber
The more expensive a car is directly relates to all the gadgets and computers contained within. Basically just more stuff to fail and break or go bad rendering the vehicle to the scrap heap. So much of the technology in the cars of today are out of the reach of most owners and even many of the corners auto repair shops.
As an example, I have 2 full sets of wheels and tires for summer and winter on both of our vehicles. I bought the second set of the exact same wheels for each SUV and had snow tires and the TPMS (Tire Pressure Monitoring System) sensors installed. Every spring and every fall when I change the wheels I have to take the vehicle to the dealer to re program the TPMS sensors or the idiot light remains on. You can't do it yourself because it takes a very expensive computer to read the TPMS sensor frequency and then plug into the OBD in the car to change the settings. Wish I could just monitor my own tire pressures just like I have for the past 50 years.
Are you still able to check your tire pressures manually?
(If you can't figure that one out, you are a city slicker, for sure....lol)
New cars are generally bought on credit, using a loan from a bank. But the interest-rates on long-term bank loans are derived from the yield on long-term U.S. Treasuries.
So if the yield on Treasuries goes up, the interest-rate on car loans goes up. As a result, the demand for car loans declines. But since most buyers of cars only buy with loans, a decline in loan demand results in a decline in car demand.
In this case, yields on long-term bonds have gone up recently because of a belief that President Trump's policies will lead to inflation. No one wants to loan money to the government (or to anyone else) if they believe they're going to be paid back in depreciated currency.
So the real question we should be asking ourselves is not "why are car sales declining?" but rather "why were car sales so high for so long?"
If the market is correct in thinking that inflation is coming, it means that past car buyers got a sweet deal. They were able to borrow dollars when dollars were expensive and pay them back when dollars are cheap. So why did anyone loan them money?
And why did so many foreigners buy U.S. bonds at high prices all of these years and push interest-rates down when it was obvious that the U.S. government was on a fiscally unsustainable path and would eventually have to devalue the dollar?
That's the real question everyone should be asking.
But I have also read things indicating that the Fed never intends to bring rates back up, but instead wants to force negative interest rates as has happened in nations like Cyprus.
Maybe residents of other countries have been buying long-term U.S. bonds because they believe the Fed will buy the bonds from them later at a higher price (pushing their yields down, possibly into negative territory).
It's really hard to know now because the markets have become permanently distorted as a result of QE.
But, for whatever reason, investors are currently afraid that the Fed is going to just let rates go higher and will do nothing about it.
So they are selling their bonds...and this is causing car loans to become more expensive....which is causing auto-sales to decline.
I just wanted to point this out....because it seems like it has been absent from the discussion.
1992 D250 with Cummins engine
1993 D350 with Cummins engine
No need for anything new. Cummins engines don't die.
If you're interested in their offerings, look here: https://www.eliomotors.com/
I have never bought a new car, but I have good credit and would consider buying a nice Jeep Grand Cherokee new if it came with autodrive that was at least good on highways.
Jan
People actually want the electric/hybrid cars and those are selling well (at least, last time I checked.) If you sell a product that people want to buy, they will do so. If you try to convince people that the next round of cosmetic changes is worth forking over a ton of bucks, then you get headlines like, Car Sales Drop.
I bet the first autodrive option cars will go like hotcakes.
Jan
Here's one e6430 example, but I have seen better ones on Ebay recently:
http://www.ebay.com/itm/Dell-Latitude...
Heres an e6330
http://www.ebay.com/itm/Dell-Latitude...
Jan
(But getting a new laptop is ultimately 'work'.)
In my experience AMD has a driver problem that they have not fixed in 7 years according to internet discussions. The symptom is that windows lose their size and position when the lcd monitor power is cut off and back on, switches to low power idle mode, or signal source is changed on the monitor. Nvidia has no such problem. If a company can't fix a problem like this with one monitor connected to a windows OS computer (W7, W8, W10 all have the same issue) then they don't deserve my business.
AMD's gpu products are the same price/performance level as Nvidia but use significantly more power to get results compared to Nvidia. imo, it appears that AMD trails the leader in gpus as well as cpus.
Is there another competitor in the gpu competition?
Samsung an Motorola would also like to be competitors in the GPU market, but they're pretty far behind either nVidia or Intel simply from an R&D budget standpoint.
The way my cousin always compares Intel vs AMD is to say that AMD has a faster raw processor for mathematics, but Intel's is a better multi-purpose chip. With nVidia vs AMD/Intel, AMD/Intel is a generation behind nVidia in power usage development, which is why their processors run hotter.
Yes, that has been going on for at least 30 years (probably ever since the end of WW2.) I love to see real improvements in products, too.
Sorry if I wasn't more clear, but I was mocking them and their conclusions in this article. The sad truth is that they have continually priced their customers out of the market. It used to be that the cost of a car was about 1/2-year's salary. Now they've become more than an annual paycheck. And automakers wonder why they aren't selling as many cars.
There is so much that is advertised that is just 'stuff' and nothing really advantageous. Making something that is actually an asset can still get sales.
Jan
Jan
I just saw an article by Graham Summers that claims the next market crash will be driven by the sub prime auto lending programs, that have gone overboard on poor credit risks and is now causing the market to nose over, as it has saturated the market. There are not enough qualified buyers for the sales they need to feed the wall street thirst for constant profit increases, so they did the next best thing, loan to anyone who is living and breathing, job optional. Just like the mortgage market did. He is forecasting any time now a big implosion of the debt and securities markets which will trash stocks.
We don't need another program to pay people $4,000 to trash a perfectly good car by running the motor with bits of metal in the oil. I found that disgraceful.
And it is typical in driving off the lot for a car to lose 10%-15% of its resale value. Ridiculous but it is what it is. What that really shows is that automobiles are over-priced compared to true market value.
Typically for vehicles, depreciation schedules is five years - even for commercial big rigs. No company in their right mind is going to pay for it on consumer terms of eight years...
I completely agree that we don't need a "Cash for Clunkers" program. They touted that one as a way to clean up the environment, but what it really was was a shot at the Federal Government to control the dealers (you should have seen what they demanded in order to sign up to participate in the program) as well as to drive consumers to new cars to profit their union pals.
I think gov't paying people to break perfectly good stuff is evil. Certainly poor and/or frugal buyers would have been interested in purchasing a $3000 that the gov't paid someone $4,0000 to trash.
Those cars have a higher cost on the environment than other cars, but by how much? Maybe three times worse? So someone consolidating three car trips into one have more effect. Let's say driving a new $20k car 25 miles generates $0.25 in local pollution and $0.75 in long-term costs of global warming, for a total of $1, and the old $3k car costs $3 per 25 miles--> the old car is $0.08 / mile more a toll on the environment. So even if people had to pay for the damage to the environment, they'd have to drive $17k / $0.08 = 212,500 miles before the new car was cheaper. For someone who doesn't drive that much, the clunker is the better choice.
This is complicated because it's hard to quantify the immediate local pollution from an old car, and it's really hard quantify the future costs of global warming and then amortize them back to the prevent-value cost of a something you do today. We're not even sure what percentage of which human activities cause global warming. But it's damned simple to quantify the value lost by trashing a $3,000 car: $3,000.
BTW, most of the cars sold in New Zealand are used cars imported from Japan. As I understand it, the Japanese are hit with a large tax if they keep a car beyond a few years. This is supposed to help the Japanese auto industry, but it also provides a benefit to NZ drivers because there is a big supply of relatively young used cars for import from japan.
I love that people have the choice to buy new cars here, too. I will need to buy another good used car someday;^)
Our cars are from '02 and '05. So far they keep running, and the mfg scheduled maintenance isn't bad. I'm not sure if that's true of recent cars. I just know my 15-y/o car is nothing like the 15-y/o cars I remember from long ago.
I wish there was more room on the road to enjoy them though ;^)
If I tesr a fender off I mskr a trip to the salvage yatd for another one that might cost me $50.00. Right now I've got 5 of these trucks. 4 are V8, 3 of those are 4x4, one has a snowplow on it, and one is 2 wheel drive. Plus the wrecked one is V6 4x4 so I've got some goid spare parts for my drivers and an engine and transmission to sell. The nice thing? All I've got tied ip in these 5 trucks is $3800.00, and the last V6 and manual trans I sold for $1000.00 ad I recall.and in the 15 or so years I've been doing this they've stranded me once while I can't remembet how many broken down cars I've hauled in!