New vehicle sales were released a couple of days ago. The headline of the story is that sales set a new record in 2015 – 17.47 million, beating the previous record set in 2000. It got me wondering. 2000 was fifteen years ago. Since then, the U.S. population has grown by about 13%. So the new record should have easily topped the 15-year-old record, right? Wrong. It barely beat the 2000 record by only about 100,000 vehicles, or by about 0.6%.
So I couldn’t help but wonder: is it possible that we’re already beginning to see a decline in the per capita consumption of vehicles in the U.S., which is what the inverse relationship between population density and per capita consumption that I presented in Five Short Blasts would predict? In Chapter 10 of the book I theorized that the U.S., though much less densely populated than many other nations, had already crossed the threshold where a growing population density begins to erode per capita consumption and, with it, the economy, and that this happened sometime perhaps in the ’50s or ’60s when our population was half of what it is today.
New vehicle sales is one piece of consumer data that’s readily available and not a closely-guarded secret of some market research company. So it was time to find out how new vehicle sales have changed over time as our population has grown. I plotted such sales going back to 1968 versus the U.S. population and here’s the result: auto sales 1968-2015. The following are some observations about this chart:
- New vehicle sales tend to swing up and down pretty wildly, dropping precipitously during recessions and shooting back up during recoveries.
- I don’t know what happened prior to 1968, but it’s clear that between 1968 and 1978, the per capita consumption of new vehicles was rising quickly, jumping 44% to .067 vehicles per person, which is about one vehicle for ever 15 people.
- That figure of .067 vehicles per person in 1978, when our population was about a third lower than today, still stands as the record level. The next peak of per capita consumption of new vehicles in 1986 didn’t quite rise to the same level, reaching 0.66. The next peak in 2000 – the record that was just broken this year – reached only 0.62 new vehicles per person, well short of the 1978 peak.
- This total vehicle sales record set in 2015, when expressed in per capita terms, even misses the 2000 mark by quite a large margin.
Clearly, per capita consumption of new vehicles is in decline, and has been declining since as far back as 1978. One could argue that 2015 may not be a peak, that vehicle sales have been climbing steadily since 2009 when they reached their lowest level of the entire 1968-2015 period. The auto industry projects that sales could go higher in 2016. I think that’s unlikely. First of all, though 2015 was a record year, the sales rate in December fell to its lowest level since June, and December is typically one of the strongest sales months of the year. Secondly, 2015 was the sixth consecutive year of sales volume increases, the longest of the 1968-2015 period. Previously, the longest period of annual sales volume increases was four years, from 1983-1986. Finally, look at what’s happening in the economy in general beginning in December. Many economic indicators are now turning negative. Most would agree that the auto industry’s expectations of a stronger 2016 are a pipe dream.
So just how fast is per capita consumption of new vehicles declining? To find out, I re-plotted the data beginning with 1978 and had the computer generate a trend line with an equation to describe it. Here’s the new chart: auto sales 1978-2015. Now you can see the clear downward trend. Of the four different mathematical formulas that could be used to describe the trend – linear, logarithmic, exponential and power – the best fit was a linear equation. The formula is included in the chart: f(x) = -.0003x + .06. (I’ve rounded off the two constants for clarity.) This means that as our population continues to grow at the same rate – about 1% per year – per capita new vehicle sales will decline by .0003, which is about a 0.5% decline.
Why is this happening? It’s pretty simple, really. Most of our population growth is in urban areas where there’s been strong demand for apartment-style housing. We examined in a recent post how renters are increasingly paying a greater percentage of their incomes on rent. And people who live in apartments in metropolitan areas face big obstacles when it comes to car ownership – especially the lack and high cost of parking, both at home and at work, not to mention the traffic issues in the cities. It’s just cost prohibitive to own a car, so many opt for public transportation. The root cause of this situation, though, is ever-worsening crowding driven by the increase in population density.
Sure, there are many factors that may be at play here but, for each one you can name, I can name another offsetting factor. Cars are built better and last longer? Everything about our society pushes people to buy new cars more often – not less. Cars are less affordable? Dealers now practically give cars away, with loan durations of six or seven years, when three years was the norm back in ’78.
This decline in the per capita consumption of vehicles is yet another example of the conflict of interest that’s created once a population breaches that critical level and begins to drive down per capita consumption. If you’re a consumer, it’s in your best interest that the population stabilize or even shrink a bit, increasing your quality of life and enabling you to live in uncrowded conditions where you can enjoy all that life has to offer, including the freedom to own a car and travel at will. But if you’re General Motors, it’s in your best interest that the population continue to grow because if the population grows by 1% and per capita consumption declines by 0.5%, your total sales volume still increases. And we saw this happen in 2015. Sales set a new record in spite of a significant decline in per capita sales. And so it’s also in the best interests of General Motors to fund candidates who support high rates of immigration.
Immigration-fueled population growth is steadily ruining our quality of life. Though few really understand why, more and more Americans seem to sense this and it at least partly explains the popularity of the few candidates who at least oppose illegal immigration.