AD #1648 – High Prices Hurting Sales, Lexus Creates Hoverboard, New Camaro Convertible Debuts
June 24th, 2015 at 11:48am
Runtime: 7:52
- Ford Reveals New Mobility Plan Details
- Ford-UAW Art
- VW Expands Metal Stamping In TN
- Lexus Creates Hoverboard
- New Camaro Convertible Revealed
- More Americans Priced Out of New Car Market
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On today’s show…Ford offers new details about its mobility plan, Lexus takes us Back to the Future and why more Americans are being priced out of the new car market. All that and more coming right up on Autoline Daily.
This is Autoline Daily for June 24th, 2015.
FORD REVEALS NEW MOBILITY PLAN DETAILS
Earlier in the year Ford revealed its Smart Mobility Plan which involved a number of mobility experiments around the globe. And now the company is entering the next phase of that plan and will focus on two areas, multimodal mobility solutions and flexible use and ownership. Multimodal mobility refers to finding other ways to get around in big cities where driving isn’t as feasible. One solution Ford introduced is an electric bicycle, that can be configured for use in the city or off-road and can be folded up to fit inside a vehicle. The ebike also can be paired with a smartphone to give the rider updates for things like weather and traffic and it includes eyes-free navigation. To help meet the flexible use and ownership area of mobility, Ford announced a pilot program called Peer-2- Peer Car Sharing. The service is being offered to thousands of Ford Credit customers in the U.S. and London and allows them rent Ford vehicles for short-time use. The pilot program runs through November.
FORD-UAW ART
From time to time we’ve been showing you some of the art work done by UAW workers who work at Ford. It’s all part of a UAW-Ford art exhibit that really impressed us. Well, here’s another piece. It’s hand blown glass that was done by Brenda Schultz, who works at Ford’s Research & Innovation Center. That’s right, not all UAW workers are on the factory floor. Some are involved in the most advanced parts of the company.
VW EXPANDS METAL STAMPING IN TN
Earlier this week we told you Volkswagen had a big announcement for its plant in Chattanooga, Tennessee. The automaker revealed that it’s partnering with Gestamp, a company that designs, develops and manufactures metal components. Gestamp will expand its current facility in Chattanooga as well as build a new stamping plant that will produce parts for VW’s upcoming mid-size SUV and the Passat. VW currently ships parts to its plant from press shops in several states. So by moving the stamping facility closer to its assembly plant, the partnership will allow the company to greatly reduce transportation costs.
And we’ll be back with more right after this.
LEXUS CREATES HOVERBOARD
Next to the Delorean time machine, the hoverboard is the most wanted technology to come from the Back to the Future movie series. And now, thanks to Lexus we may be able to check that off our wishlist. It created a Hoverboard that uses magnetic levitation with liquid nitrogen-cooled superconductors and permanent magnets to give it frictionless movement. And just so you know it’s a Lexus, the board features a spindle grille. While I haven’t seen anyone ride it, yet alone support a human’s weight, Lexus says it will be testing a prototype in the coming weeks ahead of a campaign launch this summer.
NEW CAMARO POPS ITS TOP
Chevrolet has the perfect solution for all those potential new Camaro customers worried about rearward visibility, a convertible. As with the coupe version, the convertible has dropped at least 200 pounds compared to the outgoing model. The top is completely automatic with latches that will release and secure it and the new Camaro also features a hard tonneau cover that automatically deploys over the top once it’s down. The system can operate at speeds up to 30 MPH and remote operation with the key fob is now an option. The new Camaro convertible will be available early next year.
And be sure to join us for After Hours tomorrow when our special guest will be David Woodhouse, the chief designer for Lincoln. He’s the one who designed the new Continental, so if you have any questions you want answered about that car send it to [email protected]. And then join John and Gary for some of the best insider discussions in the business.
Coming up next, John gives us a look at how more and more Americans are being priced out of the new car market.
HOW MUCH IS THAT NEW CAR IN THE WINDOW?
New car sales in the US market are running strong and could hit 17.3 million vehicles this year. Everyone in the business is smiling and patting themselves on the back about the auto industry’s good fortune, But a deeper dive into the numbers shows that more and more Americans are being priced out of the new car market.
I dug up sales data for the last seven decades, comparing new car sales to the population of the United States. And then I calculated what percentage of the population bought cars in those years. I looked at the best and the worst sales years in each decade.
The best sales years were in 1978 and 1986, when 6.9% and 6.8% of the population bought a new vehicle, respectively. The worst years were in 1961 and 2009, when only 3.7% and 3.4% bought new cars. In fact, 2009 was so bad that you have to go back to 1933 and the Great Depression to find a year that was worse. In 1933 only 1.7% of the population bought a new car.
| Year | Sales | U.S. Population | % Buying |
|---|---|---|---|
| 1951 | 6,275,000 | 154,877,889 | 4.0 |
| 1955 | 8,481,000 | 165,931,202 | 5.1 |
| 1961 | 6,872,000 | 183,691,480 | 3.7 |
| 1969 | 11,552,000 | 202,676,946 | 5.6 |
| 1970 | 10,211,000 | 205,052,174 | 4.9 |
| 1978 | 15,423,000 | 222,584,545 | 6.9 |
| 1982 | 10,538,362 | 231,664,458 | 4.5 |
| 1986 | 16,323,021 | 240,132,887 | 6.8 |
| 1991 | 12,549,523 | 252,153,092 | 4.9 |
| 1999 | 17,414,728 | 272,690,813 | 6.3 |
| 2001 | 17,472,378 | 284,796,887 | 6.1 |
| 2009 | 10,602,043 | 307,006,550 | 3.4 |
| 2010 | 11,772,526 | 309,330,219 | 3.8 |
| 2014 | 16,841,973 | 318,881,992 | 5.2 |
If sales in the American market hit 17.3 million new vehicles this year, that would represent 5.3% of the population. Imagine if the market hit the same percentage rate that it did in 1978. If 6.9% of the population would buy a new car, sales would hit 22 million vehicles! Even if the rate returned to the same rate that it was as recently as 2001, sales would hit 19.5 million. That means anywhere from 2 million to 4.5 million households have been priced out of the new car market.
There are a number of reasons for this, but two stand out. First, household incomes have flat lined for over a decade. Second, new car prices are stretching beyond the reach of many households. The average new car price is now $33,500, while the average household income is $53,000.
Today, more and more American households are turning to the used car market for their transportation. But this trend suggests that many of those households may be ripe for car sharing programs and other mobility services. If those services turn out to be cheaper than buying the average used car, I think we’re going to see a massive upheaval in the automotive market.
Anyway that’s how I see it, and I welcome your insights as well.
And that wraps up today’s report, please join us again tomorrow.
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Comments (45)
June 24th, 2015 at 12:42 pm
In regards to the piece on new car per capita rates, is it possible that fewer new cars are purchased due to longer life spans of newer vehicles? In the late 90s and early 2000s I still heard allot of people say they were not comfortable driving a vehicle over 100k miles. Today, I think the culture is adapting to the real life span of newer vehicles.
June 24th, 2015 at 12:48 pm
My issue with your theory regarding an increase in Car Sharing due to the stagnation of household incomes and the ever increasing price of new and used vehicles is that as the demand for Car Sharing increases so will the associated cost. The simple Supply and Demand model. Autonomous driving technology will also increase the cost of the average vehicle in the next decade further discouraging vehicle ownership. The American automotive fleet will probably increase in age to fifteen years on average due to improved durability and the high cost of a replacement unit and other variables like increased fuel, insurance and registration fees.
June 24th, 2015 at 12:57 pm
John – It’s a little nit-picky perhaps, but did you just take the total population to calculate the % buying? There are a number of variables that could influence the percentage. I’m just curious and not trying to argue. Nevertheless, I would easily agree that many are being priced out of the new car market, thanks in part to all the fancy let-your-car-pay-attention technology. Personally, I’m not opting out of the new car market (I far too picky about condition to do so), but I am being more conscientious about how much I pay for my next vehicle when my lease expires soon.
June 24th, 2015 at 1:01 pm
Looking forward to seeing a real hoverboard, even with a spindle grill.
Another factor in new car sales is how long a vehicle lasts. Newer cars last longer than they did 20+ years ago. There is not as much need for a new car. Many vehicles are leased and rented and those good used vehicles are marketed as “like new”. When I do replace my 15 year old Jeep Cherokee, it may be with a certified used or former rental vehicle.
One of the things that irks me about Sergio Marchionne is that he wants to reach 6 million in sales yet he abandones the convertible market by not producing a convertible 200 or Challenger.
June 24th, 2015 at 1:03 pm
New car sales- in today’s world car ownership isn’t necessary for millions of people because of things like Uber, car sharing, public transportation, better cycling infrastructure… I know people who own a older car and when they travel they just rent.
Also in 1978 as a child you couldn’t wait to get your own car and house or apartment, unlike today, when it seems the parents have to leave to get away from their children and repossess their car.
June 24th, 2015 at 1:07 pm
The future of new car ownership sounds like it’s on the brink extinction. I foresee Autonomus vehicles becoming the future of mass transit where fleets of cars are owned by large corporations or cities and people just pay membership fees or per mile rates. Essentially just like bus service now, with the convenience and flexibility of door to door service on your schedule. Great thing about Autonomus vehicles is they will be able to show up and return themselves to their home base.
June 24th, 2015 at 1:09 pm
It would be interesting to look at average fleet age over the last 50 years or so as well. I think you would find they are getting older.
While economics is certainly part of the reason, improved reliability and rustproofing must play a major role too. In the 1970′s, cars rusted out in 5 years. Now, they go over 15 years with little or no rust showing. People don’t have the same “tension for change”. It’s harder to justify changing a well running, rust-free car.
June 24th, 2015 at 1:30 pm
C-Tech nailed it with his comment. New cars last longer than ever. And used cars are a good buy, since a 60,000 mile car isn’t ready for the scrapheap. I’d love to see an analysis of SAAR assuming that cars lasted as long as they did in the 50s and 60s.
June 24th, 2015 at 1:53 pm
ownership rates
The reality may even be worse. High lease rates, especially in aspirational brands, and lengthened loan terms are a pair of tools that are permitting many people to drive home their shiny wheels. And upholding the whole financial structure is a federal reserve that holds down rates and makes capital plentiful. If my car got whacked, stolen or otherwise, I’d probably look for a used car.
June 24th, 2015 at 2:02 pm
Mark ups, too
The margins in finance are also what allows dealers, new and used, to make money even when they say they’re being squeezed in sales.
So everyone is stretching. Personally, I don’t feel compelled to buy the new cars I see. Maybe this is a factor for others for whom cars are appliances, which are indeed more reliable and durable.
June 24th, 2015 at 2:03 pm
So why are average car costs going up and up; well there is inflation, there is mandated content, there is content that people once tried find it hard to do without with their next purchase. Apparently the American buyer hasn’t reached ‘saturation shock’ quite yet, with the SAAR still climbing, so it will be difficult to know when it becomes critical and sales stall or plateau. Seemingly the manufacturers are not gouging the public (on most models) as competition is still steep especially on the high volume models but with the numbers John mentioned (cars at around 30.5k and household income at 55k average) it is becoming a stretch for a lot of folks to be/stay in the new car market.
June 24th, 2015 at 2:07 pm
I agree with Lex, though I also believe that vehicle miles driven will behave like energy. In chemistry class, we learned that energy is conserved. In other words, it doesn’t go away, it merely changes form. I don’t buy the potential massive decrease in auto sales theory because I don’t believe that Americans are going to suddenly and dramatically reduce the number of miles that they travel. Even if they change their ownership habits, the number of mile will, in general, remain the same or increase. They will travel those miles in a car, regardless of who owns it or how it is piloted. So, with the level of miles being driven remaining constant, how will car sales decrease? The number of parties actually buying cars may be reduced, but they will buy more of them (car sharing services, etc.). Cars won’t magically start lasting longer, so they will still need to be replaced at roughly the same rate. Autonomous cars may eventually allow a family to own one car rather than two, however that one car will wear out sooner and need to be replaced more often. So, the study predicting a large reduction in car sales is fundamentally flawed.
June 24th, 2015 at 2:10 pm
People are being priced out of the new car market, especially those who think they need a 5500 pound SUV to go a couple miles to get groceries at Walmart. Those people can get a barely broken in used one for half the price of a new one. Also, as C-tech said, cars last MUCH longer that they once did. My first car, a ’57 Chrysler was badly rusted in 10 years, went through 3 generators, a starter, and a hose or two, in about 80K miles. The 392 hemi had another 200K miles left in it, or a few miles, 1/4 mile at a time in a dragster, but the way the car rusted, it amazes me that I still see these cars in shows.
June 24th, 2015 at 2:13 pm
I’ll add that consumer buying power is also being boosted by a stock market that in turn is aided by low interest rates. So this helps at least some segments of the population to at least come up with a down payment, and means that looking at average household income misses another source of money for consumers.
June 24th, 2015 at 2:45 pm
GM ADAS at Freescale FTF
Whaa? So GM’s John Capp, their safety boss, appeared at Freescale Semi’s forum to talk safety and increasing autonomy. One thing he talked about was vehicle to pedestrian communication which would be direct, peer to peer, allowing real time responsiveness. Freescale will merge with NXP, creating the largest supplier of semi tech to the auto industry. If you want to see Capp speaking, start the linked keynote file at about 1:17.
http://www.freescale.com/webapp/video_vault/videoSummary.sp?&code=FTF-2015-KEYNOTE
Plus, Apple’s Steve Wozniak spoke earlier today about autonomous cars and smart cities, though the video hasn’t yet been posted. Stay tuned.
June 24th, 2015 at 2:46 pm
I’m looking around to replace Crapolla and I am suffering from used car sticker shock. 8 yr old Yaris hatchbacks with over 100k mi and even more, nothing to be found for less that $6k around these parts. Thinking I’m better off with another corolla, but too many years driving Corollas, I want a change and I like hatchbacks.
June 24th, 2015 at 3:00 pm
There was a time when, on a really quiet night, one could hear the car rust. fortunately, the quest for improved fuel economy has resulted in the use of lighter materials such as aluminum, magnesium, and carbon fiber. These materials are also resistant to corrosion which makes the basic structure of the car last longer.
With current mechanical technologies like reliable fuel injection instead of the dreaded carburators back in the day, people feel less motivated to trade their cars as often as they used to.
Many luxury features have trickled down to lesser cars which reduces the need to trade up.
For most people, the negotiation process itself is enough to motivate one to delay the purchase of a new vehicle.
The car industry is adopting new technologies at a very fast pace. Cars today can even have their own WiFi hot spot. It appears that ever-improving technology will be the new driver of obsolescence that motivates people to buy new vehicle.
My cars last a long time because I adhere to the factory recommended maintenance schedule and have all scheduled maintenance, including oil changes, done by an authorized dealer. Nevertheless, there comes a point in time, usually just before a 5-year warranty runs out, when a low-mileage car still has a reasonable residual value and the dealer who maintained it and knows the car, will be happy to buy it from you for good price.
June 24th, 2015 at 3:07 pm
15 You really got some service out of old Ca’Rocinante, Pedro. How many miles now?
June 24th, 2015 at 3:19 pm
8k away from 400k. needs tires, brakes, struts, some rear suspension work not to mention an interior that has seen better days. Scared to throw in over a grand and then have it die on me due to all the miles. And they have not been easy, highway miles at all, mostly bumper to bumper traffic, frequent stops in the unforgiving So Fl heat.
June 24th, 2015 at 3:34 pm
A used Toyota Matrix or Pontiac Vibe, Pedro? Both considered Corollas by Toyota. 4 doors and a hatch.
June 24th, 2015 at 3:37 pm
15 Now is a good time to buy a Prius, new or used, with the cheap(er) gas, but I’d be uninclined to recommend one to someone who keeps cars as long as you do, both because of the battery, and all of that power electronics. It might go 20 years and 400K miles, but if stuff failed, it could be expensive.
June 24th, 2015 at 3:40 pm
19 Yep, they’re practical, and generally reliable. CK had trouble with leaky aluminum wheels, but used steel wheels would be cheap.
June 24th, 2015 at 3:45 pm
Yep, here too. The Vibe/Matrix has to be one of the best all around packages I’ve ever seen.
June 24th, 2015 at 3:48 pm
Check this out, Pedro.
http://miami.craigslist.org/search/cto?query=pontiac+vibe
my sister has one too.
June 24th, 2015 at 4:20 pm
Yep, Brett and HtG, a used Matrix (Vibe) makes a lot more sense than a much inferior Yaris, similar money and the latter will beat you up after awhile with tight interior space and choppy ride.
June 24th, 2015 at 4:46 pm
Hey! Someone has to be at the bottom.
I thoroughly enjoy my 2009 Yaris Sedan with 5 Speed. It has 120k miles on it. And when I filled up this morning it got 43mpg.
Things to understand. The sedan is longer than the Hatchback and the Manual transmission has 5 gears compared to 4.
I also added a lot of sound deadening and a nice stereo system.
June 24th, 2015 at 4:46 pm
25 All of the automatics are 4-speed, but they still get decent mpg. The second generation, 2009 and later, used a 2.4 as the “hot rod” engine, rather than a more highly tuned 1.8. The base engine in both generations is same 1.8 as Corolla.
June 24th, 2015 at 4:59 pm
I also owned a 1992 Toyota Tercel. The Yaris is a luxury car in comparison. However, I did enjoy the pure simple transportation concept of the Tercel.
June 24th, 2015 at 5:03 pm
A friend of my sister’s had a Tercel, I think a 1980. I drove it some, and thought it drove fine, at least around town. That car was an odd ball, though, in being a very basic front driver, but with the engine mounted longitudinally. I never knew why they did that.
June 24th, 2015 at 5:07 pm
The Yaris is still my first choice, but as a used car, it is not a real good buy, you are paying for the fact that it was built in Japan and it’s great on gas plus very reliable, but you can get “more” car for similar money with either a Corolla or Vibe, I guess that rear seat will be down most of the time, since there is only 2 of us and barely ever carry passengers in the rear.
June 24th, 2015 at 5:09 pm
I have a neighbor who bought 2 Tercels last year, I’m sure it was an economy related decision. They always used to buy larger US vehicles.
June 24th, 2015 at 5:18 pm
Toyota was offering 0% for the first time, when I got my Yaris.
That put me at a $250.00 a month. Which when gas prices went high I was spending less money than driving my truck to work.
June 24th, 2015 at 5:24 pm
Autotrader is not a good place to buy cars, Craigslist has better prices and more selection from individual sellers.
June 24th, 2015 at 5:34 pm
Bradley is a believer, poor Yaris gets a bad rap from so-called automotive experts, they don’t understand that some people just need basic, economical, reliable transportation. No direct injection, CVT, computer controlled HVAC systems, power everything, which ends up breaking down and needing repairs.
June 24th, 2015 at 5:47 pm
A Yaris is one of the cars I test drove before buying my MINI. Yeah, they are a lot different cars, but similar in some ways, like having small, not-too-powerful 4 cylinder engines, and the 2 door hatch Yaris I drove was similar in size.
The MINI has much sportier handling, is probably quieter, and and is more relaxed at highway speed with a taller top gear with its 6-speed, than the Yaris’ 5-speed. For basic transportation, though, especially if not much highway driving is involved, the Yaris is fine, and has a much better reliability record that some cars, like MINI. My MINI has been fine, though, but it has an easy life, and not many miles.
June 24th, 2015 at 6:45 pm
To be honest they priced me out of a new car a long time ago. I bought my 1989 Mustang GT new in Oct. 1988 for $16,200. With every option available except for the Auto trans ( I got the stick) So flash forward today a comparable Mustang GT is over $40 K . Nearly 2 1/2 times the price of the 89 . My pay unfortunately hasn’t gone up 2 1/2 times since then. Hence the reason I own a 98 and 01 ZX2 with 140K and 128K on them and just bought a well maintained 98 F150 with 214K . If you do the routine maintenance they will last 20-25 years easy . Anyone living where they use salt brine to pretreat the roads in winter make sure you was the undercarriage as soon as the roads have cleared that crap is eating everything under the cars. Brake lines caliper slides, chassis, fuel lines. Really nasty stuff. I’d love to own a new car ,but unless I settle for any new car and not what I really want I don’t see it happening anytime soon.
June 24th, 2015 at 7:15 pm
John,
Is it possible to pull together historic data on new car price and household income to see how that ratio trends over the past 70 years? That would seem to show if things are getting better or worse in pricing people out of the market.
June 24th, 2015 at 7:26 pm
#36 Me too, in 86 I bought a Camry LE for approx $13.5k in ’98, the Corolla for the same price, cannot touch anything new for nowhere near that unless it’s got no A/C, Not an option down here.
June 24th, 2015 at 7:33 pm
According to a couple sites I found, $16,200 in 1989 would equal about $33K in today’s money. Wouldn’t a new zero option Mustang GT, with an MSRP of about $33K be at least as well equipped as a “loaded” ’88? I suppose the ’88 might have sunroof and/or leather that a new zero option one wouldn’t have, but if you really compare prices of today’s mainstream cars with those of the “good old days,” today’s cars are a pretty good value.
June 24th, 2015 at 7:42 pm
Securitization of debt has allowed more people to finance their cars. No matter what level, new or used or beater, the markets have an appetite for car payments. Maybe it’s because the ghouls in their towers on the Hudson understand people will make their car payment, as it means transportation to work. I don’t know how a historical comparison lets us understand how times have changed, unless we also take into account changes in financial products.
The idea of a new car is a little odd to me, as I doubt most normal people can even tell the difference these days. It isn’t like the old days when then new year’s cars would appear in the fall and it was a big deal. Who can really tell if your driving a ’99 Porsche Boxster or a ’15? Do you care?
June 24th, 2015 at 7:44 pm
“…most normal people can even tell….”
I mean to say that if you’re concerned with what the Jones’s think, they can’t tell the difference at all.
June 24th, 2015 at 7:46 pm
Here is one of many “correct for inflation” tools, most of which come up with similar results. http://www.davemanuel.com/inflation-calculator.php
“Official” inflation takes into account a lot of things which may, or may not affect any of us personally. For example, the high inflation, but even higher interest rates in the late ’70′s and early ’80′s were a good deal for my parents, who had no debt, but some money that did well in high interest CD’s.
June 24th, 2015 at 7:48 pm
Just keep your wheels clean and well maintained.
You are a winner.
June 24th, 2015 at 7:55 pm
There are so many horror stories from customers re their bad experiences with local dealers and their price games they play. Ex. there is a Nissan dealer about 200 mi from here that advertises on the net Versas automatic for less than $10k (impossible) You know that is not true, I just wonder what BS they give you when you show up there and try to buy one for that amount. I read that they charge $800 dealer fee and overcharge for everything and the cars are already waxed and undercoated and you have to take it, cause it’s already been done to the car.
June 25th, 2015 at 9:28 am
44 Maybe it’s 10K, if you have a trade in that’s worth 10K, or something like that.