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As the Detroit automakers look to restructure, reinvent, and ultimately save themselves, they are up against a trend that has come about over the past couple of decades.
Source: Bureau of Economic Analysis. Click to enlarge.
The graph above shows monthly sales, at seasonally adjusted annual rates, of new cars and trucks (including SUV’s and pick-ups, but not larger construction vehicles and semi’s) in the United States. New car sales have declined, or at best stagnated, through the 1990s and into the current recession. During the 1970s and '80s, car sales sometimes reached rates of 12 million or more per year, but in recent years the rate was only about 8 million (and during the current contraction has fallen to just 5 million). In contrast, sales of new trucks steadily increased from the 1970s right up until the mid-2000's, as consumer preferences shifted toward larger vehicles. The dilemma arises from the sharp swings in gasoline prices that began last summer, as well as the Obama administration’s push for increased fuel efficiency. Automakers have the difficult task of trying to forecast whether energy prices will continue to rise and how much any rise might hamper sales of new vehicles, especially trucks, in the future. The new fuel efficiency standards will tend to push automakers toward producing smaller vehicles. But automakers, especially the Big Three Detroit companies, must also consider the possible ramifications of shifting away from trucks -- the very sector of the industry that has tended to grow over the past 40 years -- and changing production over to cars, a sector for which U.S. sales have been stagnant. As late as May, the best-selling new truck in the U.S. (Ford’s F-Series) outsold the best-selling car (the Toyota Camry), despite concerns about the cost of fuel. It is difficult to say if the dual trends of increasing sales of new trucks and decreasing (or stagnant) sales of new cars will continue after the recession is over. But the long history of declining car sales is difficult to ignore when thinking about the industry’s recovery.
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