Why car sales could slow down for years
Did you notice that car sales in China decreased in 2018 for the first time in 20 years?
And decreased by 6% or over 1 million vehicles in a 22 million market. The biggest car market worldwide.
Why that happened? As usual there are many reasons like the trade war or bear stock market but two reasons seem not be mentioned often:
- Demographics: population is stalling and ageing in China
- People are postponing buying to wait for electric cars
Ageing
Even if the world population is still growing by around 1% a year, the main car markets worldwide are China (22 millions), Europe (14 millions), USA (17 millions), Japan (5 millions). In all these areas population is ageing so there will be more retired people who will commute much less and so they will change their cars less often or do not feel safe at driving anymore.
The United State are a bit of an exception because population is still growing quite fast at 0,8% a year but the ageing process is happening anyway and growing urbanization leads also to reduction in car ownership. The US car market increased by only 0,3% in 2018, therefore less than the population growth.
Waiting for electric cars
Last year for the first time in my life I bought a car. Previously I was using just car sharing services but now I moved to another city and needed an own car.
I chose to buy a used plug-in hybrid car because I want to wait for new full electric models at lower price to enter the market or existent cars like Tesla Model 3 to enter the used car market.
I am not alone in this thinking. Thousands of people waited years to buy their Tesla Model 3 so I can imagine that they either used longer than forseen their previous car or bought a second-hand car to travel in the meantime.
This process already happened in general in Norway were plug-in market share is around 50% now and in the previous years people avoided buying new gasoline or diesel cars to wait for new models in larger numbers. As a further proof Norwegians often bought used electric cars from abroad to fill the local gap between demand and supply of electric cars.
I am quite sure that in China people are waiting too. Sales of electric cars is supply-constrained in the sense that there are not enough models at the "right" price yet, so many people prefer wait and mantain their current car or postpone buying their first car.
In Europe people are afraid to buy the "old" technology, ie diesel cars, and the market is slowing hard in the last months of 2018. Why buy a new diesel if its value could collapse in a few years because of driving bans in city centers and people shifting to the new technology.
Conclusion
Much before that plug-in cars become the majority of sales in a market people become aware that the trend is real and growing and this expectation influences deeply their consumer decisions, postponing new car purchases.
In a few years then there could be new trends happening like robotaxi and the process continues affecting negatively new cars sales.