Market Change Predicted as Scrappage Outpaces Sales

By Marc Stern

816 views Jan 21, 2010

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This is the first time that there has been any shrinkage in the American automotive fleet of trucks and cars, according to a study released by the Earth Policy Institute. The scrappage rate last year showed the first shrinkage in the American automotive fleet from its record 250 million vehicles to 246 million now.

Institute President Lester Brown, quoted by the Reuters News Service, believes this means the United States is entering a new era. The new era is one that is moving from a car-dominated transport system to one that is much more diversified.

That diversification includes:

• Expansion of urban mass transit systems

• Expanded use of light rail vehicles

• Expanded encouragement of eco-friendly modes such as bike paths and pedestrian friendly streets

• Expanded use of special bus lanes

Some cities are actively encouraging the switch from cars by raising the cost of parking and cutting the number of parking spaces that are required for new building.

There seems to be an interesting split among cities, too. Older, more established cities, such as New York, which has had a mature mass transit system since about 1890 and Boston, which boasted the first underground transit system in 1880, are facing funding crises as state and federal subsidies that have helped to keep fares low have dried up. This means that they have had to raise fares, while newer city transit systems Houston, Phoenix, Seattle and Nashville, for example are expanding and encouraging ridership.

All of this boils down to the fact, the Institute believes, that the era of 17 million car sales years may be over. Indeed, the Institute study notes, that there are factors that are working to keep sales down that include:

• Market saturation

• Increasing urbanization

• Economic uncertainty

• Gas price uncertainty

• Frustration with traffic and time lost

• Climate change concerns (already spurring the move toward electrics)

• Changing attitudes among younger folks about cars

One key to predicting where the automotive market is heading is saturation. It appears to the Institute that the United States has reached saturation as there are 246 million cars on the road and only 209 licensed drivers, roughly five vehicles for four drivers.

Using the only other modern example available, Japan, the Institute pointed out that the Japanese auto market reached saturation about 20 years ago and since that time sales have shrunk 21 percent. Japan's automotive market is certainly saturated as the country is highly urbanized (many people live in the cities and don't require cars to move about, using mass transit or buses, instead) and this can lead, in many cases, to increased frustration with traffic and the waste it causes.

The Institute's President Lester Brown argues that the costs of traffic congestion in wasted time and fuel have risen from $17 billion in 1982 to $87 billion in 2007. That's roughly a 500 percent increase in wasted time and fuel costs in the space of 25 years, which is a huge figure, when you think about it.

Compounding the economic losses caused by congestion there are today's economic uncertainties that see families cutting back from three cars to two or two to one and making do with that one vehicle. Families have seen fuel prices spike over $4 and know of the uncertainties of fuel supplies because the majority of gasoline flows from a very politically unstable region. Plus families are also feeling the economic uncertainties of job loss.