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Auto industry’s Big Three look overseas for sales
Question of the Day
The U.S. auto industry staged a convincing recovery last year, rebounding by 11 percent from lows set during the recession with the sale of 11.5 million new cars and trucks in 2010.
But now that Detroit’s automakers are back to financial health, they increasingly are looking overseas for sales. China and India, where yearly auto sales of 13.2 million and 12.3 million surpassed the U.S. for the first time during the recession, will continue to be the biggest growth markets as their middle class prospers. Opportunity also is burgeoning in other fast-growing countries including Russia and Brazil.
In the U.S., Ford Motor Co. led the resurgence in sales, reporting a 19 percent jump over 2009 sales Tuesday and increased its U.S. market share for the second year in a row largely at the expense of second-ranked Toyota, which was hobbled by safety issues during the year.
Chrysler, which went bankrupt along with General Motors in 2009 and survived thanks to a government bailout, also made a surprising comeback with a 17 percent gain in sales. GM, which started to sever its umbilical cord to the U.S. Treasury last fall with a much-heralded stock offering, clocked in with a 6.3 percent sales gain.
But GM — still the largest of Detroit’s Big Three despite a massive bankruptcy-induced downsizing — is enjoying robust sales in China and is well-positioned to take advantage of the surge in growth there.
“The U.S. auto industry is gradually recovering from its worst year since 1970,” said David Wyss, chief economist at Standard & Poor’s, noting that while U.S. sales rose solidly from 2009’s depressed level of 10.3 million, they remain far below the average level of 16.7 million achieved between 1998 and 2007.
U.S. sales picked up at the end of 2010 to a 13 million annual rate, leading some forecasters to say the U.S. market could recover more quickly to that level or higher as consumers gain confidence in the economic recovery and see the need to replace aging vehicles.
But the U.S. will be hard-pressed to equal growth in China, where sales skyrocketed by 53 percent in 2009 with the help of government incentives and millions of middle-class consumers buying cars for the first time, creating a bonanza for car companies worldwide.
With 16.4 million in auto sales reported through November of last year, analysts estimate the total for the full year 2010 was close to 18 million — a new record for any single nation.
“China’s car market has grown rapidly to become the largest market for cars,” said Sean Jutahkiti, an analyst with CreditSights. “With growth consistently in the double digits, China has significantly outpaced other markets, both developing and developed.”
Even with its rapid growth recently, China still has only 42 passenger cars for every 1,000 people, compared with 800 in the U.S. Because most cars sold there are smaller than in the U.S., the average price of a new car in China is $16,000 compared with $28,000 in the U.S.
Many major automakers have established or are scrambling to establish plants and joint ventures in China, and some such as Nissan are tailoring cars specifically for the Chinese market.
John Paul MacDuffie, a professor at Wharton Business School, said GM and its Chinese partner, Shanghai’s SAIC Motor, are poised to take advantage of China’s growth.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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