One Sector Continues to Look Healthy Despite Low Confidence, Attempts at Distortion

For the automotive sector, the beat goes on. New car and light truck sales numbers are as good as they have been in more than a year, even if they are off a little from the high reached last month. This is certainly good news for parts and services suppliers as well as the general economy, itself. What’s all the more amazing is that this comes after a tough winter and a time when consumers have generally been in a pretty morose mood.

General retail numbers have not been at all impressive. Each month, the growth in sales data has been overwhelmingly carried by the continued demand for vehicles. Automakers have been encouraged by the return of demand for the larger vehicles, as these are generally more profitable. The consumer seems pretty confident in the low price of fuel going forward, which has allowed people to focus on something other than fuel efficiency.

If one follows the various “stories” on the Internet featuring “car graveyards,” one might expect to learn that the automakers are churning out millions of cars that are going unsold. These pictures of hundreds of cars lined up on some airfield are very often misleading. Some of these are staging areas and, as fast as the cars arrive, they are shipped out again. Others serve as lots devoted to fleet purchases from rental car companies and the like.

The fact is carmakers are not all that interested in providing excess inventory—dealers and others in the habit of buying lots of vehicles have spoken for the majority of the cars and trucks coming off the line.

- Chris Kuehl, Ph.D., NACM economist

1 comment:

  1. Some are suggesting that the loose credit of the car dealers is going to lead to another bubble. Do you see any evidence to back this up?