The U.S. economy has grown faster than many other advanced economies in recent years, according to data released Monday by the National Bureau of Economic Research.
But the auto industry has been hit by the collapse in the price of parts, and the price is expected to continue to rise over the coming years.
That’s because the cost of new car parts, like airbags, brakes and tires, is a growing problem, said James McAfee, a professor of economics at the University of Michigan.
That means automakers need to develop new parts for their vehicles to meet the needs of newer and older cars.
If the price stays low, it will put additional pressure on the auto makers to keep up with the cost, which has been falling for decades.
McAfee said the trend has been building up over the last several years, with the average price of new parts rising from about $50 in 2006 to more than $600 in 2017.
In some cases, he said, new cars are made to fit older models, but older cars can be easily upgraded to fit newer cars.
One problem is that automakers are only now starting to get the parts to the market, meaning there’s a risk that parts will become expensive to manufacture in large quantities.
McAfee said that means the costs of the new cars that are being manufactured won’t necessarily be reflected in the prices of the old cars.
“What you’re seeing now is a very low cost for the cost to produce parts,” McAfee told CNBC.
Some automakers are already starting to realize the problem, including Toyota Motor Corp., which announced in January that it will sell new cars in 2019 at a lower price than before, a decision that McAfee called a “positive sign” for the auto maker.
McAfee also pointed out that some of the parts manufacturers are already using technology to lower the price.
“They’re already lowering the price, and we’re going to see that increase over the next several years,” McAuge said.
Automakers can try to find ways to reduce the cost but the problem of overproduction is likely to persist, McAfee predicted.
The average car costs $26,800 to make, but the average new car is expected at around $40,000 to $50,000, he added.
“There is some kind of supply glut,” McArdle said.
“I don’t think that is a real threat.
I think it’s a threat of oversupply.”
McAfee and other experts expect that will likely continue, and he warned that if carmakers don’t make changes soon, they could see the prices on the streets of the U.K. or Germany.
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