Evening star. [volume] (Washington, D.C.) 1854-1972, 1921-11-20
AUTO REPLACEMENT MARKET
CALLED FUTURES GREAT FIELD
Banker Analyses Conditions Found in
Industry and Predicts Increase In
Number of Concerns Involved.

IAN examination Of available data
points Enthusiastically to the conclusion
that the great automobile market. OF
the future will be the replacement
market In 1929. for the first time
in the history of the industry. more
motor vehicles will be needed to re-
place scrapped cars than will be
added to total registration" writes J.
H. Collins in Automobile Trade
Journal for October.
"A recent analysis of the automobile
industry and it's future. prepared 6y
a we'll known Cleveland banker, prob
ably presents the sanest expression
on the subject which has to dase
emanated from financial circles. 10
the writer this report. coming from
banking institution. has pecullar
significance. 1t shows in an 1ndirect
way that the magnitude. future posi-
bilities and business stability OF the
wonder child" of American business
has at last impressed the nnancial
fraternity. whose attitude Tor tne
past decade has been one OF parliai
skepticism, to put it mildly.
May Expand Figures.
"The writer of the analysis just
referred to limits the number or pos
sible purchasers of motor vehicles 10
twenty million. This figure repre-
sents the number OF natiVe-porn
white men in the United States above
the age of twenty-one. 1t Is also the
number of persons whose earnings, In
the opinion of the writer. make II
seem possible that they might De-
come car owners. 1t Is also the mum
her of white American families: On
offered above seems rather conclusive.
Closer analysis. however brings 70
light some possible sources OF error.
In the first place. the increasing
number of cars now being soio 10
residents in the United states OF ior-
eign birth, and the purchase by our
negro citizens of large numbers OF
the cheaper makes of cars brings TO
mind the not unreasonable assumP
tion that the figure given ABOVE
might be expanded by neSrly % per
cent without prejudice to actual facts.
In the second place. it must also ne
remembered that hundreds OF tnou-
sands of car owners regularly mann
tain from two to four cars each, thus
swelling total sales beyond the limit
indicated above.
"A statement to the effect that the
present productive capacity OF the
Automobile industry is more than one
million cars per year greater tnan
would be required to maintain the
existing use of machines in con-
slant status, is somewhat misleading
in that normal production and ca
Dacity production are not syhony-
nous terms. and existing plants Ssn
be. and have been. operated prontaoly
on schedules appreciably below ca
pacity output. AS a matter OF colo
fact, normal replacement Of worn-out
cars for the next two or three years
would permit profitable operation OF
practically every we'll estapllSneo
plant now making cars and trucks.
THE assumption that the average
life of cars in service Will increase
during the next few years is mega
lived by the fact that the largest IN
crease in production during the past
wear or two has been in the low
priced class, where cheap construc-
ton will. if anything. add to the an
nual mortality.
Two Viewpoints Presented.
Having noted the above exceptions
to what on the whole Is an admirable
report, it becomes necessary to con-
tinue our inquiry into the future
status of the industry. A proper con-
sideration of this problem involves
analysis from two viewpoints:
81. What is the condition of the in
dustry itself with special reference to
production facilities and inventories?
so. What will be the condition and
character of the market for motor
vehicles during the next period OF
three to five years?
The first consideration can be dealt
with in a few brief words. Internal
business conditions are still subject
to considerable improvement. but. on
the whole, the automobile industry has
cleaned house with commendable
thoroughness. Inventories have been
reduced to a point which did not
seem possible year ago. Manufac-
turing costs already are on a level
with costs in other lines of industry.
Prices in many cases are below pre-
war levels. and this fact in itself not
only will stimulate sales but will
open up new market among those
to whom the automobile has previous
ly been luxury beyond the reach of
a limited income.
1.-The important consideration today
is: What will be the character and
condition of the market for motor
vehicles during the next few years.
IF we assume that the average life
of cars in service during the next five
years will be about six years each
land there is nothing to indicate that
the life of such cars is likely to ex-
coed such a figure materially, we
realize Tat the market of the future
is the replacement market. During
past years more than half of all cars
made each year in the United States
have gone to new car owners, apd
thereby served to increase registra-
ton totals. This is condition which