Recently, the availability of affordable new cars in the United States has declined significantly. Currently, the Mitsubishi Mirage is the only car that sells for less than $20,000 on average. This is in stark contrast to a year ago, when there were twelve vehicles in this price range. While several factors are contributing to this trend, it cannot be attributed solely to the pandemic or inflation.
One of the main reasons for the decline in affordable options is that manufacturers have focused on producing crossovers, which are in greater demand and can fetch a higher price. This shift is occurring in both the gasoline and electric vehicle markets. Manufacturers stop producing cheap, basic cars and opt for slightly improved crossovers that can generate more profit. This choice has resulted in a limited range of affordable new cars.
However, this trend has significant implications. Firstly, there are still buyers who rely on cheap cars for budgetary reasons. Parents buying vehicles for high school teenagers, grads, college students, retirees, and those on lower incomes may not be able to afford more than one inexpensive vehicle. As the supply of affordable new cars decreases, so do the availability and affordability of used cars.
If the situation worsens, people with very limited budgets and bad credit will find it difficult to find reliable transportation. In addition, the decline in cheap new cars will result in fewer ultra-cheap used cars, hitting lower-income groups even harder. This can lead to an increased demand for alternative modes of transport such as public transport, bicycles, and e-bikes. Cities and urban areas need to invest in better infrastructure to meet these needs. The auto industry could also suffer as demand for cars among the younger generations decreases.
Despite these challenges, the market offers opportunities. Chinese automakers have the potential to launch affordable cars that meet US emissions and safety standards. This would allow them to break into the affordable car market and potentially expand into upscale segments. Also, Chinese manufacturers are already flooding the US market with affordable electric bikes, minicars, and micromobility options. US electric bike companies can capitalize on this trend by offering affordable yet high-quality products.
In summary, the decline in affordable new cars is a complex problem with multiple causes and effects. The shift toward producing more profitable crossovers has limited the availability of cheap cars, hurting buyers who rely on affordable transportation. However, this situation also presents opportunities for Chinese manufacturers and US electric bike companies to fill the gap in the market.
