Since almost no one in the US or Europe is buying cars, auto companies have been looking to China for salvation. That does not put them in a different class from other large companies including Wal-Mart (WMT) and Dell (DELL) who need hot sales on the mainland to prop up their earnings.
It turns out that, even though the economy in China is still doing well, the consumers in the world’s most populated country are cutting down on picking up new cars.
Among the reasons for this may be that the Chinese who can afford cars have them. The data on that point is not readily available.
August car sales in China did fall 6% in August. According to The Wall Street Journal, "In 2007, China’s vehicle sales rose 21.8%."
That news has to be a blow to Detroit, but it may give the industry leverage in Washington when GM (GM), Ford (F) and Chrysler hit the Beltway for the $50 billion in loan guarantees. They can claim that they have to count on more fuel-efficient cars to jump start US sales now that the rest of the world is not so attractive.
China was supposed to be the market that got the global auto industry back on track. It was supposed to become the world’s largest car market in the next two or three years.
It looks like the car companies are going to have to come back to the US and hope against hope that the market turns up here.
Douglas A. McIntyre
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