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California?s Auto market Continues to Fall
Nov 07, 2007

The auto market in California is declining because of increased interest rate, slow economic growth, declining housing market, high customer debts, increased spending and less saving by the people etc.

For the first time in five years, the sales of new cars in California are expected to fall below the 2 Million mark in 2007, said the dealers in the state on October 22. By September 2007, sales of new trucks and cars were 9.3% less as against to the same time period in 2006. In Q3 alone, the sales dropped by 11.2% as against the same quarter in 2006, as reported by Mercury News.

There are many reasons for this slowdown in the market. These include slower economic growth, increased rate of interest, slump in the housing market, and higher consumer debt levels. The ill-planned finances in many of the households in the state are also to be blamed, as people almost stopped saving and increased their spending. The downfall in the subprime mortgage market and the rise in foreclosures nationwide have made the lenders to put restrictions on all kinds of credit, including auto loans.

The new vehicles’ sales in California increased annually since 2001. It was at its highest in 2005 when around 2.2 Million units were sold. However, sales reduced to just about 2.1 Million last year. Dealer group believes that the sales will fall again - as low as 1.87 Million in 2007.

The dealers of the state are also of the opinion that the sales will decline even in 2008, but would rise again in 2009 and 2010. They, however, also predicted that the sales would not be able to reach the 2 Million mark in this decade.

Peter Hoffman, Chairman for CMCDA, said, "Dealers are re-aligning their inventories to match the changed mix in the market. We expect customers to be attracted by the many new and environmentally-friendly, fuel-efficient vehicles being offered in 2008 and to take advantage of the many aggressive manufacturer programs and incentives being offered", as reported by Business Times.

According to a Senior Research Analyst at RNCOS, “The California auto market deceleration will make things worse for the whole country. To keep the profits growing, the auto dealers should adopt some more strategies to tackle this problem and aggressively market and promote green cars to attract customers”.

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