US Auto Sector to Keep Dropping Till 2020

There's no doubt 2009 was one of the most difficult years in the history of the US auto sector and the bankruptcies of two of its largest carmakers, GM and Chrysler, are the living proof. But the Car Allowance Rebate System (CARS), or Cash for Clunkers as some people called it, brought a smile back on their faces, boosting sales, creating jobs and luring buyers back into dealership.

Unfortunately, a study release in January by the Earth Policy Institute (EPI) is predicting a gloomy future.

First of all, the CARS scheme was less useful that some might be tempted to believed. According to the aforementioned study, the cars scrapped in 2009 exceeded new car sales, reaching the highest level since World War II.

At this time, the United States has an average of 5 vehicles for every 4 registered drivers, while the country's vehicle fleet decreased from the all-time high 250 million units to 246 million vehicles last year.

What does this mean? Well, according to the study, taking into account a drop of 1 percent to 2 percent a year from 2009 through 2020, the US fleet could number around 225 million in 10 years, a reduction of around 10 percent.

“No one knows how many cars will be sold in the years ahead,” EPI President Lester R. Brown said in the study. “Economic uncertainty makes some consumers reluctant to undertake the long-term debt associated with buying new cars. Perhaps the most fundamental social trend affecting the future of the automobile is the declining interest in cars among young people. Beyond their declining interest in cars, young people are facing a financial squeeze.”