Car Sales Are Dropping Fast — And Not Because of the Semiconductor Shortage
Supply chain issues have hampered automakers, but the dreaded Osborne Effect is a much bigger drag on the industry
In February 2019, Maarten Vinkhuyzen wrote an impactful article in Cleantechnica titled “The Osborne Effect On The Auto Industry”.
In his research, we can read how the Osborne Effect was going to impact the auto industry in the following years due to an increase in demand for newer battery-electric vehicles that were not going to be ready yet.
He predicted that this increase in demand tied to a limited supply would cause customers to postpone the replacement of their old vehicles until the new products were available, which, at the same time, would drop vehicle sales harming the industry.
The Osborne Effect
You might have heard of this phenomenon before. It is the consequence of customers canceling or deferring the acquisition of a new product due to the announcement of a superior one long before it is released.
It is named after the Osborne Computer Corporation which announced a new model of their personal computer a year before it was available to the public. This superior product made customers decide to wait until it was available and harmed seriously the sales of their current product to such an extent that the company had to file for bankruptcy.
In the car industry, Maarten Vinkhuyzen believed that the far superior battery electric vehicles would make customers wait to replace their current models until their favorite brands would have the equivalent available. In this case, the Osborne Effect is not happening just to one company but to a whole industry.
The problem is that this was not going to happen instantly and customers would wait several years not replacing their cars and causing big harm to the auto industry that needs to continue its business to finance the transition. We are talking about heavily indebted enterprises that cannot afford to lower their revenues as they have to maintain their facilities, and employees and pay back their liabilities.