Cars and Drivers

U.S. Becomes Odd Savior of Global Car Industry

The European Automobile Manufacturers Association reported that car and light truck sales in the region fell by 5.8% in December as demand in Spain and Italy was crushed. Total registrations in Europe came to 13.6 million vehicles. That is moderately larger that in the U.S. and moderately less than in China. But, as activity in Europe contracted, American sales rose 9% in December to top off a year in which they increased 10%. The U.S., where car sales dropped sharply in 2007, 2008 and 2009, has become the region where global manufacturers have to pin their hopes for expansion. During the recession, large car companies decided to look elsewhere. That has turned out to be a mistake.

China became the world’s largest car and light vehicle market two years ago as it passed the U.S. Chinese sales totaled more than 14.4 million last year. But its grow for 2011 was only 4.6% in December and 5.2% for the year. Government incentives that helped 2010 sales, which were well into the double digits, are gone. China was supposed to be the primary market that made global auto manufacturing into a growth industry again. It will not, at least for the time being.

China’s auto sales are not expected to grow rapidly this year. Those in Europe likely will fall again. Sales in the U.S., though, are forecast to rise as much as they did in 2011. The race to do well in the U.S. market is on again. Market share has been rebalanced in the past five years. Hyundai, which had almost no share at all a half decade ago, controls 7% of the American market. Sales of Japanese cars have fallen. The Big Three have regained some of what they lost in market share since the 1980s.

The most troubled large global manufacturers are Fiat, Peugeot Citroen and Renault. Each relied on the EU to be the foundation of its sales and for China to be its growth market. They entirely avoided America. Fiat has tried to change that with its buyout of Chrysler. That does not guarantee that Fiat models can gain a beachhead here. Initial sales of the Fiat 500 have been poor in the U.S.

The sales and profit battle in the car manufacturing industry will happen in the U.S. more than anywhere else this year, and most likely for the next several. The auto companies that counted this market for dead will pay for their decision.

Douglas A. McIntyre

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