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Aging Vehicles: Americans Hold onto Combustion Engines Amid COVID Pandemic

Aging Vehicles: Americans Hold onto Combustion Engines Amid COVID Pandemic

Introduction

A recent study by S&P Global Mobility has shed light on an intriguing trend among American vehicle owners in the final stages of the COVID pandemic. The research reveals that due to supply constraints, reduced consumer demand, and higher inflation, Americans are holding onto their combustion-engine vehicles for longer periods. The average age of U.S. cars and light trucks has reached a record-breaking 12.5 years. However, amidst this trend, electric vehicles (EVs) are bucking the aging pattern, with a relatively young average age of 3.6 years for battery electric vehicles (BEV). This article examines the findings of the study, analyzes the factors contributing to the trend, and explores the implications for the automotive industry.

Factors Driving the Increase in Vehicle Age

The record-high average age of U.S. cars and light trucks can be attributed to several factors. Firstly, supply constraints have impacted dealer inventories of new vehicles in 2022. This scarcity has made it challenging for consumers to replace their older vehicles with newer models. Additionally, reduced consumer demand resulting from higher inflation and interest rates has led to a decline in new vehicle purchases. The combination of limited supply and decreased demand has resulted in Americans prolonging the use of their existing combustion-engine vehicles.

Optimistic Outlook for Vehicle Age Reversal

While the average age of vehicles has been steadily increasing for the past six years, the S&P research suggests that this trend may soon be reversed. As availability of new vehicles improves and consumer demand rebounds, new vehicle sales are predicted to surpass 14.5 million in 2023. This anticipated growth in sales could lead to a drop in the average vehicle age over the coming year, providing a glimmer of hope for the automotive industry and indicating a potential return to a more vibrant market.

Electric Vehicles Defying the Aging Trend

In contrast to the aging combustion-engine vehicles, electric vehicles are displaying a different pattern. The study highlights that the average age of battery electric vehicles (BEV) in the U.S. has actually decreased slightly to 3.6 years, down from 3.7 years in 2022. This relatively young average age is attributed to the rapid increase in BEV sales, which saw a 58% surge in 2022. Despite a greater percentage of electric vehicles leaving the population, compared to combustion vehicles, the rising sales have kept the average age of the BEV sector relatively low.

Implications for the Automotive Industry

The findings of the study have significant implications for the automotive industry. The prolonged retention of combustion-engine vehicles suggests potential challenges for automakers, as consumers delay new purchases. This may impact the profitability of manufacturers and dealerships alike. On the other hand, the resilience of the electric vehicle market presents opportunities for growth and innovation. As BEV sales continue to rise, manufacturers can focus on expanding their electric vehicle offerings and investing in research and development to enhance their market share.

Conclusion

The study by S&P Global Mobility highlights the shift in vehicle ownership patterns among Americans in the waning days of the COVID pandemic. The data reveals that Americans are holding onto their combustion-engine vehicles for longer periods, resulting in a record average age of 12.5 years for U.S. cars and light trucks. Supply constraints, reduced consumer demand, and higher inflation have contributed to this trend. However, amidst the aging of combustion-engine vehicles, electric vehicles (EVs) are defying the norm, with a relatively young average age of 3.6 years for battery electric vehicles (BEV). The upward trajectory of BEV sales has kept the average age of the sector low, despite a higher percentage of electric vehicles leaving the population compared to combustion vehicles.

Rogerio Alvarez is an experienced financial journalist and author who specializes in covering economic news for Livemarkets.com. With a deep understanding of global finance and a passion for uncovering the stories behind the numbers, Rogerio provides readers with comprehensive coverage of the latest economic developments around the world. His reporting is insightful and informative, providing readers with the knowledge they need to make informed decisions about their investments and financial strategies.