The US auto industry has hit a serious slump
in 2008, with overall sales estimated drop by two million vehicles compared to 2007. Even the mighty Toyota has seen sales slip by 7.8%, which is better than the industry average, but a far cry from annual increases of 10%. And times may not improve in 2009 either, as the credit crunch and mortgage crisis have conspired to kick the auto industry in the pants. Toyota sales boss Jim Lentz says the mortgage crisis is the main culprit of tough sledding for the Japanese automaker. Florida and California, which account for 30% of overall Toyota Sales, have been especially hard hit by decreased home values. Lexus sales have been hit hard, too, as one third of all of purchasers in the Sunshine State use home equity to buy their luxury vehicles. It doesn't take an accounting degree to know that houses are typically assets and cars are almost always liabilities. That large amounts of people who were using home equity to purchase cars is disturbing, and it's likely a trend that isn't unique to Toyota.
Toyota does see light at the end of the tunnel, as the Japanese automaker expects the US population to grow by 32 million in the next decade. Toyota also expects the rate of affluent customers to rise, which means more people with more money will want to buy a new car or truck. For the near term, since housing has gone nowhere but down and lenders are having trouble coming up with money, we're guessing the car market will be taking a hit for quite a while.
[Source: Detroit News]