Where the Cars Are (and Where Potential Sales Growth Might Be)

by: Ryan Avent

Felix has been making some sound points about potential long-run trends in the American car market here and here (see also). The bottom line? It sure seems as though the number of vehicles purchased per household is destined to decline. Americans will buy fewer cars, smaller cars, and own them longer. That spells deep trouble for automakers dependent on the American market. But in making his point, I think he reveals a deeper dynamic, that may well do more to shape automaker fortunes:

Still, check out this league table: the US has vastly more cars per 1,000 people than any other major nation. Canada, for instance, has only 563 vehicles per 1,000 people — less than three-quarters of the US figure. For America to even approach that level would be unprecedented in living memory, but there’s really no particular reason why the average American needs 36% more cars than the average Canadian. If you’re losing say 15 cars per 1,000 people per year, it would take over 14 years to get down to Canadian levels of car ownership.

He’s explaining how absurd American levels of car ownership are, and he’s right.

But check out that league table. Even a very progressive, transit friendly place like Denmark has 408 motor vehicles per thousand population — a low rate for a developed nation. Meanwhile, Brazil has 81 vehicles per thousand people. India has 12 per thousand people. And China has 10 per thousand people. Yes, American consumption rates are likely to approach the upper range of the other developed nations, but so what? If Brazil, Indian, and Chinese rates of vehicle ownership get anywhere near the lower end of the developed nation range, then we’re talking hundreds of millions of new automobile sales.

This relates directly to the point I made earlier today concerning oil prices — it’s not about us. I’ve been known to worry about excess automobile capacity in the past, but I’d worry about it more if China weren’t so busy building highways.