Boomers Boom Followed By Car Bust

Bertel Schmitt
by Bertel Schmitt
boomers boom followed by car bust

Consulting firm Alix Partners predicts a slowdown of U.S. auto sales. The study, reported at Reuters, cites the usual suspects, such as lingering high unemployment, increased costs and more people driving less. It then touches on something that is very basic, but often overlooked: Sales are driven by the number of potential buyers. If there are fewer buyers, there will be fewer buys. New cars are bought in certain age groups, usually somewhere at around 35 and up. As the boomers are going out to pasture, there simply will be fewer potential buyers.

The peak of car demand in the early 2000s coincided with a population peak in the new car buying age. Likewise, a long valley in the new car buying age will pull down sales for decades until a peaklet of today 20 year olds starts buying new cars.

In the U.S., the effects of these population peaks and valleys are expected to be not as harsh as in Europe and Japan, where births dropped drastically beginning in 1970. This valley is now 40 years old, and it will impact car sales for a long time.

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  • Don1967 Don1967 on Jun 26, 2012

    The Boomer effect on car sales will be severe, and not just because their peak income years are over. It will be severe because Boomers have effectively spent the wealth of 3 generations, and that sort of thing creates a huge financial hangover. 1. Boomers spent the inheritance passed on by their frugal Depression-era parents 2. Boomers are spending every dime of their own lifetime earnings 3. Boomers mortgaged their children's future with 30 years of unaffordable social programs and other "love generation" pipe dreams.

  • Chicagoland Chicagoland on Jun 26, 2012

    Can't afford new car, can't qualify for the loans, and have heard 'never buy new' for years, so what to expect? And, "30 years of social.."? Asif it started in 1982, when Reagan was in office? How about that Vietnam War, Gulf War, and Iraqi Freedom? They were not cheap. BTW: Boomers had to pay for Depression era, Korean War, and WWII debts, so don't get all cocky. Previous generations paid for Civil War, new states, colonization, etc, so get over it.

    • Don1967 Don1967 on Jun 27, 2012

      Financing wars is not new. It has been going on for 4000 years, so you can't cite the most recent examples as proof of your world view. Social spending, labour laws, etc. are, however, a relatively new phenomenon. They started around the turn of the previous century, and accelerated more during the boomers' lifespan than at any time in modern history. As a result, millions of people living in developed nations now expect an inflated standard of living that is paid for with borrowed money. Anyone whose head is not firmly buried in the sand understands this.

  • Sector 5 Sector 5 on Jun 26, 2012

    Back in the 50's Detroit was happy to palm a wage & turn a profit. Today its done no-wage-robots and all about getting the shareholders a 10% yield.

  • Felix Hoenikker Felix Hoenikker on Jun 27, 2012

    This pyramid conflicts with the meme that the baby boomers are such a large part of the population. Using the popular definition of a boomer as some born between 1946 and 1961, the average age of said boomer would be 59. However, the populations of the 55 and 60 and year olds according to this chart are smaller than younger bands below them. This would tell me that there is no population "cliff" and that demographics are not the reason to expect lower auto sales in the coming years. Has more recent immigration to the US masked this by adding to the younger population bands? Am I missing something here?

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    • Felix Hoenikker Felix Hoenikker on Jun 29, 2012

      Roland, Thanks for the info. I find demographics interesting too, and am a fan of the demographic economist H S Dent. I would like to add one observation about the effect of mortality on my cohort. I recently attended a 40th high school reunion. As part of the ceremony, one class member read off the names of the deceased classmates. Being a little OCD with numbers, I counted the total and divided by the size of the graduating class to come up with a cumulative mortality of 8%. I didn't think this was too bad for a group of people that survived boh the last half of Vietnam and the much worse disco period that followed. Somewhere I got the mental picture that the boomer population would look like a pig passing through a python over time. This pyramid shows otherwise.