Car Sales Tend to Rebound Following Recessions

By Stephen Markley  on June 3, 2009

https://www.cstatic-images.com/stock/765x765/78/544772397-1425510027478. Not everyone is shouting doom and gloom from the rooftops following GM’s bankruptcy. In fact, there are economists and other analysts out there who see reasonable signs for hope — not only for GM, but for the entire industry.

To understand why is to understand a pretty simple trend: Car sales almost always rebound strongly after recessions. People put off buying cars during periods of economic uncertainty, but as soon as that uncertainty begins to wither, what’s exposed is a pent-up demand for vehicles that people feel they’ve gone too long without. Check out these graphs at the blog Calculated Risk for a good visual explanation.

Because of the depths of the car-sale plunge during this recession, the rebound could be just as striking. Robert Gordon, a professor of economics at Northwestern University, sees the situation as being fairly simple: Because auto sales have dropped from around 18 million down to 1982-level lows of roughly 10 million, the car-buying rate has become “insanely low and unsustainable.” At this rate, he points out, the average car would have to last a buyer 25 years.

Could you go 25 years on your current car?

Gordon and Calculated Risk both predict annual auto sales to rebound as soon as next year to around 15 million vehicles. For the industry overall, this is good news. For leaner, less-burdened versions of Chrysler and GM, it will create an opportunity to sell a lot of cars.

How GM Could Rebound Sooner Than You Think (Atlantic.com)



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