Market Research News

US Factory Output Drops in July Through Falling Car Production

  • August 20, 2017
  • By Pete Nisbet
  • 0

US factory output dropped in July according to the Federal Reserve. The main reason for this was ascribed to falling car production. While factory output dropped by 0.1%, overall production increased by 0.2%. This figure includes mining and utilities, increasing by 0.5% and 1.6% respectively.

 

This information was published on the Fed’s website. US vehicle sales were down 5.7% in July over the same month last year. US car sales have now dropped for the past seven months. Why is this? Why are people buying fewer cars than a year ago? SUVs and trucks are still selling well, though still slowing down, what’s the issue with sedans? Ford (down 7.4%) and GM (down 15.4%) in particular are seeing sedan sales drop significantly. Toyota sedan sales were up 3.6% compared to July 2016. Why?

US Factory Output

Crossovers Becoming More Popular Than SUVs

One of the problems that falling sales lead to is dropping prices. Incentives and inducements to buy result in reduced profits and a general slowing of the economy. Such periods of inactivity are usually temporary, but this drop could be permanent. There are several reasons for this, the main ones relating to technology and fuel prices.

 

Crossovers are increasing in popularity because they look more like regular sedans than SUVs do. The latter can tend to be bulky and handle more like trucks than regular cars, and their mileage is lower than crossovers. Crossover SUVs are therefore increasing in popularity at the expense of sedans and regular SUVs. But that’s by no means the only reason and not the main one!

 The Japanese Car Syndrome

Each of the factors above contributes to the downturn in regular US car sales. They in turn relate to the reduction in US factory output. However, there is another factor involved. Many people still believe that US cars are inferior to Japanese. Toyota and Honda are the mass sedan market brands of choice. The Japanese car syndrome is also behind falling sales of American-produced sedans.

 

There seems to be no technical reason for this, just a general conception the public has had for some time. For that reason, US car manufacturers have to spend more cash on image and promotion than the Japanese. The public must have a reason to begin buying US cars – American designed cars made in America.

US Factory Output Can Recover

 The current flux in car design and alternative energy sources gives US manufacturers something to aim for. If people want sedans as the Japanese make them, then find out why US sedans fall down! Give customers what they want. That is essential for US car sales to increase. Do what others are doing, but do it much better! Then, US factory output might rise again based upon giving customers what they are seeking, not just what is available.

 

US factory output will increase and share prices will rise again as the US auto industry competes effectively and efficiently. Not just by changing consumer conception of US sedans, but also by dominating the alternative energy market.

About Pete Nisbet

Pete has been working in the field of website design and content for many years. He has a great interest in technology and current affairs, particularly business affairs. Pete's interests are technology, writing and world affairs and he is widely traveled. Pete also holds an Honors BSc from the University of Edinburgh.