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Why We Wouldn't Buy Automotive Stocks
Just Yet: Part 2

Myron D. Stokes

Why are there so many people buying SUVs? Because their accountants told them to, that's why. In the last decade SUVs have accounted for nearly 50 percent of all vehicles sold in the U.S. Sales have grown 287 percent since 1990, far outpacing the vehicle market overall - an increase of percent 41. If you removed SUVs from the mix, the market grew only 21 percent.

The move towards SUVs is due in no small part to higher residual values in leases and which closed the acquisition gap so significantly that buyers, faced with a choice of a car or SUV, invariably chose the latter.

Besides the increased affordability factor, SUVs were rapidly becoming more content and comfort oriented. Consequently, for many people, the decision was a no-brainer.

Clearly, with more SUVs on the road, it doesn't take rocket science -- or a rocket scientist -- to determine they would have an ever increasing presence in accident statistics. And as a result, this SUV explosion contributed mightily to the ongoing safety controversy by becoming the consumer vehicle of choice.

The following McDonald Investments report, written by Senior Analyst Brett D. Hoselton and Christopher D. Manuel, is the second in the series "Why We wouldn't Buy Automotive Stocks Just Yet" (1st document) and is entitled "Why The North American Auto Industry May Never Be as Profitable As It Was in The 1990s."

This 55-page document, available as an ER PDF download, explores - no pun intended - the SUV phenomenon and its across the board economic impact.

It also discusses current indications of an impending drop in SUV sales - a direct result of the market downturn and political pressure.

 

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