Cheap Gas Moves Cars

Cheap oil continues to help and hurt US manufacturing.  The automotive industry led manufacturing losses during the recession but has been an area of strength and growth for US manufacturing in the last few years.  Sales of cars and light trucks in the US are on a pace to exceed 17.5 million in 2015, which will surpass the record of 17.4 million set in 2000.  Based on several factors auto sales could continue to strengthen in 2016.  Gas prices are expected to head lower in 2016, and cheap gas puts money into drivers’ pockets and helps them to afford bigger vehicles.  Interest rates are still extremely low, and the average age of cars on the road hit a new record of 11.5 years in 2015.  Consumers have never really “caught up” from the sharp auto sales slowdown of the Great Recession, so there’s plenty of pent-up auto replacement demand to drive strong sales for the next several years.  2016 is starting off with some uncertainty about the impact of a weakening Chinese economy on the rest of the world, and the manufacturers supporting domestic oil & gas industry are shedding jobs to deal with dismal results in the energy sector.  In the meantime US employment is still holding on at 5%.

Bruce Peacock
Vice President of Business Development
The Richmond Group USA