We May be Reaching ‘Peak Car’ and the Global Economy Could Suffer
October 25, 2019
Worldwide auto sales declined in 2018. They are expected to decline this year, and analysts are now predicting another drop in 2020. Some economists think this is a temporary slump brought on by weakness in the global economy. Others, however, think it is a sign that we are approaching “peak car,” where the world has all the cars it needs.
Auto sales have already peaked in much of the developed world. In the U.S. sales peaked in 2016. In the European Union, sales peaked in 2000. In Japan, sales peaked all the way back in 1990. The expectation was that emerging markets would continue to provide growth, however, sales there seem to have plateaued. Structural issues like emissions standards and trade barriers make owning a car more costly, and alternatives like ride-sharing apps have lessened the need to own one.
The auto industry has a massive impact on the global economy. The IMF estimates that the auto sector accounts for 5.7 percent of all global economic output and 8 percent of global trade, and when it slows down, it has an outsized impact. The IMF estimates that weakening auto sales for a fifth of last year’s global GDP slowdown and a third of the reduction in global trade.