Tuesday, May 1, 2018

Why the Car Will Not Die

The announcement came as little surprise to those who've been following trends in the automotive industry.  Ford is no longer going to build cars for sale in the United States.  Oh, they'll produce the Mustang.  But everything else is being relegated to the dustbin of history.

From here on out, it's SUVs and pickups, period.

Other manufacturers are gearing up to follow suit, with GM preparing to abandon several of its longstanding models.  The reason: sales of cars have plummeted, as Americans move to larger and more spacious 'utes as their standard vehicle.  The new Honda Accord, for example, is struggling to find a foothold in the market, even though it's received glowing reviews.

The car is dead, trumpet the car media headlines.  The car is dead, says the business news.

Only, well, I'm not so sure.

Because yeah, utes and crossovers are more spacious.  And pickups are awesome and practical.  Somehow now they've become luxury vehicles in their own right, with the average new truck ringing in at $46,000 this last year.

But what they're not is particularly efficient, and after five years of historically low gas prices, the market is shifting.  Were it not for US hyperproduction, as we frack like there's no tomorrow, gas prices would be painfully higher.  The Russians and OPEC have ratcheted back production, and our efforts to counterbalance that are now the only reason we're not seeing prices well above the $4.00 level.

We're drawing fracked crude out of the ground at a rate so fast that we'll have burned through US proven reserves in just over ten years...and that can't be sustained.

It's like it's 1971 all over again, and we're blithely repeating the errors of history.

When prices go back up, the car will return.