U.S. Is Car Industy's Last Bright Light

The European Automobile Manufacturers Association said sales reached a 14-year low in the region in March. Registrations in the European Union plus Switzerland, Norway and Iceland fell 6.6% to 1.5 million cars and light trucks. That is only 100,000 more than the March total for the United States. Fiat, parent of the remarkably successful number-three U.S. car company Chrysler, had a drop of 26% in March. Chrysler is the fastest growing large car company in America. Chrysler’s success is partially due to a surge in overall U.S. sales. That leaves America as the only large world market that is expanding rapidly.

China was supposed to be the salvation of the global auto manufacturing industry, some members of which were nearly taken under by the recession. Car and light auto sales in the People’s Republic soared to 16 million two years ago. Some of the credit for this improvement belongs to government incentives. Those are gone now, and the China Association of Automobile Manufacturers said sales rose only 4.5% in March to 1.4 million. Competition for market share in China has heated as more and more of the biggest international car companies hope to exploit its massive market. That market may still be huge, but it barely grows at all now.

The P&L details of many large auto manufacturers show that sales have been up in South America recently, but the market is modest. Sales in India also have risen, but the market for sales is small for its population. There is robust local completion, too. Neither South America nor India has enough potential to offset the trouble in China or Europe.

Only three years ago, the American market was believed to be dead. Sales were 16 million in 2005 and fell to well under 10 million in 2009. But this year sales may reach 14 million, an unexpected rebound. As it grows, the U.S. auto market has several new competitors, which include, particularly, Hyundai. That leaves larger companies like Ford (NYSE: F), General Motors (NYSE: GM) and Toyota (NYSE: TM) to work harder to keep current sales. They have to. The rest of the world has started to become a poor target for rapidly rising sales.

Douglas A. McIntyre