feature:

In the UK, we have already seen new car sales go from Healthy to Dire in a matter of months and in the US–where three out of four cars are bought on credit–customers are now a rare sight in dealerships. The cause of this might be short-term unavailability of credit, but the consequences might last much longer.

The biggest threat to automakers might not be consumers’ inability to get credit–it might be their unwillingness. When companies like GM teeter on the brink of oblivion, it’s obvious that no business is safe from bankruptcy and people fear for their jobs. With modern cars capable of running reliably well into six-figure mileages, it’s an easy decision to run the car you have rather than buy a new one.

The car industry is especially vulnerable if consumers re-think their attitudes to debt and don’t buy the volumes of cars the car companies have built their businesses to expect. The economics of car manufacturing–where enormous sums are spent on developing new models on the basis that big volumes will pay back that investment–make it hard to adjust to a new world. It’s expensive to shut factories, layoff people and write-off new models; just as it is to keep on making cars that people don’t want to buy.

The automotive landscape is likely to look very different in the next year or so. If nation states decide their automotive industries are too big to lose, and buy stakes in them, some interesting questions could arise. What happens if consumers don’t buy the cars from those nationalised car companies in the required volumes (which they probably won’t)? Will the governments subsidise the price of the cars to encourage demand? How will that work in global markets? Nationalised industries work well, when the markets those industries work in are national–like trains, post offices, utilities etc. Nationalising car companies puts taxpayers in competition with their foreign counterparts and when car plants are owned by other countries, it’s going to get complicated. 

If governments don’t step in, expect to see far fewer manufacturers, fewer brands and fewer models. It might be harder to justify loss-making, low-volume, high performance cars. Research and development will be hardest hit by reduced volumes. Motorsport–and the innovation it brings–has already shown itself to be dispensable. (See Honda F1, Subaru and Suzuki WRC for details.)

Volume will be the only game in town as car companies re-invent themselves to survive in the brave new world. 

If we do see widespread government involvement, it’s likely that car manufacturing will become more political and more complicated. Until very recently, it was easy for the might of the auto industry to ignore namby-pamby environmentalist objections. A complex mix of environmentalism, politics and economics might prove to be a more formidable foe.

The long term prognosis might not be very bright for car companies, but the immediate future for car ownership might be. Today, fuel is cheap, there are unprecedented bargains to be had and driving just for fun hasn’t yet been made illegal. The Golden Age of performance cars might just be right here, right now. 

Pictures reproduced with thanks under Creative Commons licence from the following sources: 

Dodge Challenger - Dodgechallenger1   http://www.flickr.com/photos/dodgechallenger1

It's only money - <<graham>>  http://www.flickr.com/photos/schnappi/

Huge Auto Sale - Pinkmoose  - http://www.flickr.com/photos/pinkmoose/

Distress car sale - Onohoku - http://www.flickr.com/photos/onohoku/

Veyron - Johnthescone  -  http://www.flickr.com/photos/johnthescone/