Thursday, October 21, 2010
Auto-parts sales ramp up as fewer new cars sold
This article explains the effects that a weak economy is having on the automobile industry. Presently, with consumer credit tight and unemployment high, American's are unlikely to purchase a new automobile. This recent trend has led to dramatic increases in the stock valuations of auto suppliers like Advance Auto Parts, AutoZone, and O'Reilly Automotive. This increased business has come from the fact that consumers are more willing to repair their cars now before purchasing a new car. Until the unemployment rate decreases and banks decide to extend credit to consumers for new car purchases, things will likely remain unchanged.
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I think another thing that has to do with the increase in auto-part sales and stock valuations of auto suppliers is that during this weak economy more people purchased used cars when their car broke and required too much expensive repairs, rather than new cars because they were cheaper. This increase in used car sales has led for a greater need for car parts because these used cars need repairs, that are probably smaller than the ones needed on their previous car, as they are not brand new and need repairs more often than new cars.
ReplyDeleteBefore this recession, people didn't even want to spend the minimum amount to fix their cars, like 500 for a regular maintenance (oil change, sensor change, belt change, realignment). Now people would much rather go through the hassle of getting their old car fixed then buy a new one, because although buying a new one is hassle free, it sure doesn't come without its cost.
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