Certainly, the generalized answer to the suffering auto stocks dilemma has something to do with a mixture of things, such as decreased auto sales, the price of gasoline, and environmentally-conscious consumers. Yet, upon careful inspection, one has to question why the auto manufacturers choose not to change course to meet these new demands when you have cheaper cars, high mileage, and alternative fuel sources.
According to the senior vice president and senior auto analyst at Lehman Brothers, Nicholas Lobaccaro, the success of the auto industry is suffering due to exterior factors. “There is basically a total lack of confidence for all stocks, not just the auto industry. Wall Street is going to continue to nosedive for a long time,” Mr. Lobaccaro reports to the recent Las Vegas Conference for Automotive Remarketing.
High interest rates on auto loans, high unemployment rates, thousands of home mortgages going into foreclosure, and a consistently growing population all have a factor into the auto industry’s bottom line. Consumers are cutting back in every way possible, where the middle class family who once purchased their child’s first car at a dealership, are now looking into purchasing used cars. Fewer consumers are trading up as they make choices to continue driving what they currently own. The credit crisis has virtually closed the finance market, making the sales of new cars next to impossible for a wide range of consumers.
Some of the reason for why the auto stocks are suffering can also be placed squarely upon the shoulders of the auto manufacturers themselves. Nearly forty years ago, new cars that used very little gas or no gas at all were introduced, but now with newer technology, the affordable car for the average consumer, was almost set aside and forgotten. Instead of looking into the long-term strategies, along with the sales potential of these cars and other marketing methods, the industry chose the short-term benefits package. Advertisements for fast, powerful vehicles with Hemi engines and atrocious gas mileage were being published all across the many forms of media. In the present, however, it seems that the auto industry is reaping the negative consequences from these actions, which some attribute to the industry’s pure greed.