Auto Sales: The Next Bubble?
Auto sales are expected to grow once again this month. But is the auto industry forming a sales bubble? Let's bring in Jeremy Annal.
"...expected to do about 12.5 million total this year. We could do 1 million more than that. Why wouldn't that be good news for the industry? Well, i think it is good news as far as it goes. The car companies are going to be announcing sales numbers on Tuesday. and I think most people are thinking sales will show up at a 13.4 annual basing. But you have to think about the context.
"If you remember back in March, we had the earthquake in Japan and through the summer, car sales were unusually depressed because of shortages of product and high prices. As inventories have been getting in the marketplace, prices have been normalizing. A lot of those buyers are returning, but this is a short-term effect; a lot of sales that didn't occur in the summer that will play out
"We've been talking a lot about the idea of hopium. More people are buying cars, so ipso facto
, the economy's getting better. But how many cars that are ten years old are still on the road and it's a $2,000 car that needs a $2,000 transmission and no one's going to do that? How much is necessity versus consumer demand?"