The current credit crisis"with or without a $700 billion bailout"has already spread from Wall Street to commercial banks, and from the financial sector to other parts of the economy, including to the auto industry. Here's how the credit crunch is impacting key players in the hybrid vehicle market.
Consumers Are Staying Home
While demand for hybrids remains strong, the overall vehicle market is shrinking. Some analysts are predicting that this month's sales will be off as much as 25 percent from last year. One of the biggest issues is tighter credit and lending standards. Many buyers can't qualify for financing, or must pay more for their car loans; in addition, leasing has been discontinued for many domestic models.
The result is that it is more difficult and costly to get consumers into new vehicles. To make matters worse, fewer people are shopping. Some buyers are postponing big purchases in anticipation of an economic downturn, while others have lost jobs or homes and are struggling just to make the payments on vehicles they already own. In this climate, hybrid sales could suffer if consumers continue staying home"or if they opt for cheaper, no-frills vehicles rather than cutting-edge technology.
Dealers Are Getting Squeezed
Many car dealers were already suffering before the recent market downturn. With fewer shoppers on their lots, things have gone from bad to worse. To compound the problem, dealers are now struggling to maintain their own credit. Dealerships use what is called "floorplanning" financing: they buy vehicles for their inventories using credit from banks
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