The way I see it, there are two worrying things about the car industry right now. They cost too much, and there’s a plethora of exciting and groundbreaking options for all tiers of the market. Unfortunately, yes, this does mean I’m saying your favorite new car is indicative of a problem, specifically, that it is the harbinger of a bust in the auto market
Every bust is precipitated by a boom: we climb higher and higher, ignoring the warnings, before falling off the mountain. But when you’re on top of that mountain, the view is absolutely amazing. Today, there are very few objectively bad cars, just better competitors. For perspective, only 15 years ago, a group of people who knew full well what they were foisting upon consumers would happily sell you a Daewoo. Actually, that’s a bad example, but you get my point. You’re not just spoiled for choice in the economy car section, there are great options for any type of vehicle you want, performance included.
And that’s where the red flag comes up. When everything is going well for you, it seems like it’ll be that way forever. Car manufacturers are raking in the dough, and naturally they want to use some of that money to reach for the stars. They want to give the people who love cars what they lust for. We lust for fast, dramatic, well appointed cars that make us feel alive, even when we’re simply thinking about what it can do, and now we have them. At almost any price bracket, there’s a car made specifically to be fun.
Current Model Year prices, MSRP +/- 500 in base trim (base trim with V8 for cars that really ought to have a V8)
Ford Fiesta ST: $21,000
Mazda Miata/Subaru BRZ/ VW Golf GTI/Ford Focus ST: $25,000
Ford Mustang GT: $33,000
Chevrolet Camaro 1SS: $36,000
Porsche Boxster: $52,000
BMW M3: $64,000
Charger Hellcat: $66,000
Cadillac CTS-V: $86,000
BMW M5: $85,000
After 100k does it really matter what the price is anymore? Us plebeians may have a plethora of performance to choose from, but if anything, the rich have only gotten richer. When I was a kid, the idea of even a supercar costing one million dollars was absurd. Bugatti’s launch seemed like delusions of grandeur, but a few short years later and you can spend almost five times that on a Koenigsegg CCXR Trevita, a car which exists because setting fire to $4.8 million in cash only provides temporary entertainment.
But back to the point. There’s a historical pattern one can see across the history of the automobile. Before the Great Depression, luxury car manufacturers and coach builders produced some of the first truly beautiful and innovative vehicles. Cord gave America its first front wheel drive car, as well as hidden headlamps. Pierce-Arrow delivered massive 13.5 liter engines, some of which had a unique four-valve per cylinder flathead design. Franklin brought the reliability of an air-cooled engine and lower cost to the luxury market. Stutz provided massive speed with it’s dual overhead cam engines. You could buy a Cunningham, but if you had to ask how much it was, you couldn’t afford it. There was Marmon, a company which had a heavy hand in pioneering the V-16 engine layout, as well as more practical ideas such as a rearview mirror.
And in the 1930s, every one of those companies, along with countless others, was swallowed whole by the Great Depression. During WWII, the domestic auto industry shut down completely, with entire factories consumed by the need to fill the arsenal of democracy. The industry would only fully recover in the post-war boom of the 1950s, over two decades after the start of the financial troubles.
Fast forward to the 1960s and the start of the muscle car era. Whereas the cars of the 1920s were relatively expensive models for the well heeled among us, performance was brought to the every man. Regular cars like the Dodge Dart, Chevrolet Impala, Pontiac GTO, AMC Javelin, and of course the ubiquitous Ford Mustang became available with massive displacement V8 engines. While they weren’t as fast as everyone remembered (and probably not as fast as manufacturers told us they were), the thrills one could get for a few thousand dollars was unparalleled in the history of the automobile. But by 1973 the seemingly endless postwar boom was finally over, and a recession combined with emissions regulations to again push performance vehicles to the side.
Japan provides our next example, in the late 80s and early 90s they were putting out some truly amazing, if unnecessary, cars. Kei cars were always supposed to be cheap, sensible options for the kind of person who watches whatever Japan’s equivalent of The Big Bang Theory is. But Mazda and Suzuki decided what these people really wanted was a mid engined, rear drive, turbocharged sports car with gullwing doors, and so they built the Autozam AZ-1. While the AZ-1 was the most quirky of the lot, it had competitors; namely the Honda Beat (the last car Soichiro Honda personally approved) and the Suzuki Cappuccino. The best part about a Cappuccino is that you could buy one with a 3 speed automatic. THREE SPEEDS paired to an engine that was claimed to make 63 horsepower, that’s Chevette territory.
In the more aspirational segment, Mitsubishi gave us the GTO/3000GT. Models equipped with the VR4 trim packed more technology than most supercars of the time, with active aerodynamics, turbochargers, electronic suspension, all wheel drive, and of course, four wheel steering (although you never get all of them at the same time, because something is always broken). Nissan decided to bring back the GT-R version of the Skyline, a car which single handedly induced puberty in up to 86 million preteen males. Honda made the NSX, which for all intents and purposes is a Ferrari that you can actually drive. Less successful halo cars came about as well, such as the three-rotor, sequential twin turbo Eunos Cosmo, and the Giugiaro penned Subaru Alcyone SVX, both unfortunately saddled with four speed automatics as the only option.
All of these cars were sold starting in 1989 or 90, right about the time the world was in a minor recession, and right before Japan’s asset price bubble burst. Japan’s economy was severely influenced by the fallout of the crisis, by some estimates taking over 20 years to fully recover, and many manufacturers were left with their proverbial dicks swinging in a not so divine wind. Subaru lost money on every single SVX it shifted, Mazda’s Eunos brand never panned out, and as a whole, Japanese auto firms distanced themselves from the sports car market.
So where does that leave us now? Our situation isn’t quite analogous with the previous ones. In some ways it seems quite the opposite. The golden age we find ourselves in was, after all, birthed from the near death of the industry only a few years earlier. While it seems that their design teams learned their lesson, their financial side hasn’t. We’re starting to see more and more negative equity in new car trade-ins. The average MSRP of a new vehicle is around $35,000, and length of loans continues to increase. It’s possible that we are already seeing the beginning of the end, with GM’s surplus of unsold Camaros, and the plateau of the Auto Industry growth rate as a whole.
I’m convinced that the current way our industry is operating is unsustainable. The amount of money your average American makes has been stagnant for decades, while all the necessities of life, such as cars, increase in price daily. In order to move metal, subprime or extremely long-term loans are increasing. Eventually that bubble will burst, and the auto industry may again have a crisis as people default on their loans and look towards used cars for their next purchase. I just hope they shift enough performance cars now to keep them available on the used market there.