Surplus production takes place in almost any branch but the automotive sector probably beats them all. The demand for cars is falling which means that car producers are left with a huge stock of brand new unsold cars. What actually happens to those cars?
To camouflage this falling consumer demand, car manufacturers buy up nearby lots where they ‘stall’ the unsold cars. Worldwide there are thousands of these lots where brand new cars are rusting away.
Causes of falling demand
The demand for cars is partly falling because of the rise of the sharing economy. We no longer have the urge to own everything, but rather to share goods and services. This applies to cars as well. Look at, for example, ridesharing or car sharing initiatives such as Toogethr, SnappCar and MyWheels.
Another important cause of falling demand for cars is long longevity. Cars nowadays easily last for seven years. Urbanisation also plays an important part. Car ownership is less necessary because people move to the city. After all, a car is seldom the fastest means of transport in the inner city. In addition, alternative means of transport are easily accessible.
Why on earth do car producers sustain this surplus production? This has to do with the production focus VS customer demand. Car producers adhere to the (outdated|) production focus and do not focus on customer demand and customer need. This means systematically producing too many cars that will never end up with the consumer. A real shame, if you ask me.
It’s, however, not too late for the automotive branch. In many branches, such as dairy farmers and the construction industry the production focus has in the mean time shifted to the focus on customer demand and customer need. Today, in 2017 is the production focus is obsolete and the waste this brings with it is no longer accepted. Automotive parties will transform into suppliers of mobility because this is the only way that they stand a chance!