Wall Street Journal Executive Summary Ramsey and Spector, indicate an increase in sales from major Auto makers and sales in the United States of America. The Wall Streets Journal titled “US Auto Sales Surge” indicate how leading auto sales enjoyed an upwards trend. The article by the two published on 5th January 2015, indicates an increase in sales for light cars and truck increased by more than 16% in the December of last year. The articles relate this trend across all motor dealers and manufactures. The increase in sale was also registered on luxury automobiles.
The trend is attributed to both government monetary policies and other external factors. These factors have ensured an increase in sales triggered by customers shift in demand from other luxury items to automobiles. The cost has attracted shifted demand and prompted the firms to increase supply to ensure the demand is satisfied. The essay will focus upon factors that facilitated increase in demand. Low interest rates have been identified as the reason as to why the automobile industry registered increased sales in December compared to other moths in 2014.
The government monetary policy could be the reason as to why there is increased consumption of the product in the market. Low interest rates by local banks implied that there was an increased borrowing by individuals; this will then increase consumer’s purchasing powers. The financial constraint associated with low purchasing power would be solved once the public access easy credit from financial institutions. The result is that the public will have cash to spend on basic needs as well as well as luxury goods, .
These prompted these groups of individual to purchase automobile. The increased sales are directly linked to low interest rate enhanced by government monetary policy. Low interest rates meant high demand for cars with FCA and Nissan leading the way with 16 and 11 percent increase in demand (Ramsey & Spector, 2015). Decrease in fuel prices is also a factor that ensured demand for automobile increased in the month. Low fuel prices would imply that there would be a decrease in service and maintenance cost of different cars. This would imply that many customers will demand cars on the basis that the overall cost would be lower than of the previous moths.
The low fuel prices are caused by both internal and external components. The low fuel prices will mean that majority of the customers would purchase luxury cars. This was the case of Toyota which registered and increase of 5% for Lexus which is one of their Luxury cars (Ramsey & Spector, 2015). The low maintenance cost associated with lower fuel prices would mean that a large majority of individuals will choose different models regardless of their fuel consumption characteristics.
This has been the reason as to why the overall sales of automobile improved by 16% in December of 2014 (Ramsey & Spector, 2015). Increased revenue has been the effect brought by high demand of products in the market. The short term effect is likely to change as the article indicates the government is likely to adjust their monetary policy to allow the banks increase their interest rate. This means that there will be a decrease in borrowing.
Decrease borrowing will mean low purchasing powers. The firms will thus experience low sales resulting from decrease sales. This will mean that the firms will adjust prices in an effort to increase attract customers. The effect according to Ramsey and Spector (2015) will affect the profitability of majority of larger firms. The shift in demand would means that the company would invest heavily in market as a result of increasing sales. The article relates interest rates to the purchasing powers of customers. In conclusion, it is evident that two major factors contributed to the increased sales of both luxury and ordinary automobile are fuel prices and interest rates.
Fuel prices are detected upon by external and internal factors. The interest rates on the other hand are triggered by government’s monetary policy to deal with inflation. The purchasing power related directly to low interest rates. The increase in sales across all automobile firms indicates the effect of increased borrowing rather that firm’s marketing strategy. The article indicates the trend as a short term effect as the firm is projected to have decreased sales caused by economic factors.
The supply of cars into the market is likely to be affected once the projected government policies come to effect. The decreased revenue will promote firms to adjust prices as a means of attracting customers. It is evident that the two factors where essential in ensuring each firm registered increased sales in 2014 December. Work cited Ramsey, Mike & Spector Mike. U.S. Auto Sales Surge in December. 5 Jan. 2015. Web. 13 Feb. 2015