Predictions about the downtrend of auto sales in the US are common. Analysts have estimated that the sales have fallen by 2% in the first months of 2019. Edmunds, an auto data firm, together with AlixPartners says that there is much debate on how low it will go and when to expect the market to recover.
The challenges faced by the auto industry are affected by several factors such as the following:
Decrease In Demand
There are many reasons why there is a decrease in the demand for new cars. First of all, some people just can’t afford to buy new cars. Even if a car salesperson does every “extra” thing listed in our previous post, if they can’t afford it, they won’t buy it.
There are old and used cars in the market that are much cheaper. This lures shoppers into settling for them rather than facing high-interest rates.
Those who can’t afford to buy cars also have other options such as ridesharing. In a world of technology, it has become more convenient for people to find a ride and get to where they want to go without necessarily owning a vehicle.
You might say that ridesharing or fleets could increase car demand. That’s true but most fleets already have enough cars and they may not need more in the coming years.
Environmental Impact
Let’s face it, there are still some people who don’t care about their car’s emissions. But with the government taking notice and taking necessary steps towards being more environmentally-friendly, everyone needs to follow.
Stricter requirements would mean manufacturers need to upgrade or else they pay fines. They also need to invest in new technology that would produce better cars.
The question still remains. Even if the manufacturers invest in expensive technology, there is no way to clearly know if the customers would be willing to pay for cars with the new technology.
If the production cost is expensive, we can also expect the price of cars to rise. Some people really can’t afford them and some people think they’re too expensive.
Electric And Hybrid Cars
As a response to the environmental impacts of combustion engines, hybrid and electric cars are now on the rise. However, producing electric or hybrid cars isn’t as easy or as affordable as you think.
Many companies work with other companies to produce electric and hybrid vehicles. Also, pure electric cars still have lots of limitations today due to the lack of infrastructure that will support them. That’s the reason why the demand for electric cars still isn’t that high.
Tough Times For The Industry
It’s a tough time for the industry, especially for car manufacturers. However, industry leaders are figuring out ways to go around all those challenges. Some car manufacturers, like Honda and General Motors, are working together to develop the technology that will eventually reshape the auto industry.
Tough times can be scary but it can also be exciting to see what emerges from them. There is still no clear indication on when the market will recover and when car sales will be up again.
