Vehicle Age Threatens US Car Sales

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New data show that Americans are holding on to their cars and light vehicles longer and longer. The average age of a vehicle bought new has risen from 9.3 years in 2009 to 10.5 years in 2017, according to a 24/7 Wall St. analysis of Federal Highway Administration data. Obviously, the longer people keep cars the more it undercuts sales of cars this year and beyond.

The car industry has become its own worst enemy, in part because of the higher quality of cars and how this enhances the ability to keep a car on the road for over a decade.

A major research study of car owners shows satisfaction with vehicles bought several years ago. According to the J.D. Power 2018 U.S. Vehicle Dependability Study:

Overall vehicle dependability improved 9% from 2017, the first time the industry score has improved since 2013. The study, now in its 29th year, measures the number of problems experienced per 100 vehicles (PP100) during the past 12 months by original owners of 2015 model-year vehicles.

Auto sales in the United States have been above 17 million for three years, and there is growing concern that the number will fall. This is due in part to worry that an economic downturn will hurt sales. However, the lengthening period of new car ownership has to become a challenge. New car sales have been 51 million over the past three years. The market could be saturated with new cars that owners believe are worth holding for several years.

Investors are already skittish about new car sales. While sales overseas, particularly in China, affect U.S. car company sales, their home market has to remain robust so their revenue and profits can rise. Shares of Ford Motor Co. (NYSE: F) are down 24% so far this year. The stock of General Motors Co. (NYSE: GM) is down 16% over the same period.

New car ownership could be the largest challenge that manufacturers face.

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