Industry Focus: Auto Manufacturing

Earlier this year, Motor Trend Reported the average automobile on the road today has been in service slightly over eleven years. This represents a significant 32% increase of average useful vehicle life since 1995. Quarter over quarter increases in useful life continue with little sign of subsiding in the near future.

The auto industry has faced an unfortunate combination of slow economic growth and surging fuel prices for some time. It comes as no surprise that many consumers would delay new car and truck purchases in times of high unemployment and economic instability. As gasoline pushes past $3.50/gallon and real wages have began to decline, consumers have also delayed capital expenditures to cover higher fuel and living expenses.

What is the level of pent up demand for new cars and trucks which will be unleashed when the economy turns? Will there be an unprecedented explosion in new vehicles sales? Or are we dealing with a “new normal”? These answers will have significant repurcussions not only to investments in auto manufacturers and their suppliers, but also to auto parts stores and auto repair service businesses which have seen their revenues and profits boom as average vehicle life has soared.

Please share your thoughts.


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