American Auto Market Preferred for Profit as Sales in China Slow
January 18, 2012, 9:10 AM ESTBy Craig Trudell and Jeff Green
(For coverage of the Detroit auto show, see {SHOW <GO>}.)
Jan. 11 (Bloomberg) -- Three years after sales tumbled to the lowest in more than a quarter-century, the U.S. auto market may be emerging as the safest bet for predictable and profitable growth as China, India and Brazil slow.
“The U.S. is now the high-growth market in the world as much as India or China,” said Xavier Mosquet, senior partner for Boston Consulting Group in Detroit and an adviser in 2009 to the government rescues of General Motors Co. and Chrysler Group LLC. “The worst thing five years ago was to be a U.S. automaker or supplier. Now it’s the best thing to be.”
U.S. car and light truck sales probably rose at a faster pace than China’s vehicle sales last year for the first time since at least 1998, fueled by a recovery in consumer confidence. That’s a reversal from 2009, when plunging sales helped push Detroit-based GM and Auburn Hills, Michigan-based Chrysler into bankruptcy along with dozens of their suppliers. Automakers closed plants in the U.S. and cut production as China passed it to become the world’s largest car and truck bazaar.
Now the U.S. is growing while sales are moderating in Brazil, India and China and will probably drop in debt-stricken Europe, Mosquet said in an interview Jan. 9 at the North American International Auto Show in Detroit.
“As I look around the world, my greatest confidence is about the U.S.,” said Mustafa Mohatarem, chief economist for GM, which retook global auto sales leadership from Toyota Motor Corp. last year. In giving his outlook for 2012 at the Society of Automotive Analysts’ Jan. 8 conference in Detroit, he said “the most surprising thing to many will be that the U.S. will once again be in the leading position.”
U.S. Growth
U.S. light-vehicle deliveries climbed 10 percent, or almost 1.19 million, to 12.8 million in 2011, according to researcher Autodata Corp. That’s the second consecutive annual increase of at least 10 percent after the industry’s 27-year low of 10.4 million sales in 2009. Deliveries may rise about 5.6 percent this year to 13.5 million, the average estimate of 10 analysts surveyed by Bloomberg.
Deliveries in China may have risen 3 percent to 5 percent last year, the smallest increase in at least 12 years, according to the China Association of Automobile Manufacturers, which is scheduled to release annual results this week. Based on 2010 sales of 18 million vehicles, the total may have grown by less than 1 million. Before 2011, growth in China outpaced the U.S. every year according to CAAM figures stretching back to 1998.
“The growth for the U.S. will be solid next year,” said Henner Lehne, the Frankfurt-based director of global light- vehicle forecasting at IHS Automotive, a researcher included in the survey whose 2012 estimate matches the average.
China, India Slow
The Society of Indian Automobile Manufacturers yesterday lowered its forecast for annual local passenger-car sales for the fiscal year ending March 31, 2012, saying they may be unchanged to up 2 percent. Car sales rose 4.3 percent to 1.95 million in the calendar year, the industry group said yesterday.
Demand in India, the world’s second-most populous country, slowed amid accelerating inflation and record-high gas prices. That prompted the central bank to raise interest rates and damp sales of cars in a country where about 80 percent of purchases are funded by loans. The industry group in October called for sales growth of 2 percent to 4 percent.
China’s growth slowed last year from a 32 percent increase in 2010 after its central bank raised borrowing costs to fight inflation and the government phased out subsidies, rebates and a sales-tax break on vehicle purchases.
The Chinese auto market faces “a slowdown relative to their recent past” in 2012 amid changes to the nation’s once- in-a-decade political leadership this year, GM’s Mohatarem told analysts and reporters.
Brazil Outlook
Sales in Brazil, South America’s biggest economy, will rise 4.5 percent this year to 3.58 million vehicles, the country’s dealership association, or Fenabrave, said in a Jan. 4 statement. Deliveries increased 2.9 percent last year, Fenabrave said.
U.S. sales may top analysts’ estimates, said Mike Jackson, chief executive officer of AutoNation Inc., the country’s largest retailer of new cars and trucks.
AutoNation projects sales may rise to about 14 million next year. Industrywide deliveries will be boosted by better selection of vehicle as Japanese automakers recover from last year’s tsunami, Jackson said in an interview.
Available financing and the aging fleet of light vehicles on U.S. roads should drive more sales, said Jackson, whose company is based in Fort Lauderdale, Florida. The average passenger car or truck has been on the road for more than 10 years.
“The vehicles on the roads in America are just plain old and wearing out,” Jackson said in a Jan. 9 interview. “We’re going to take another step in the recovery this year and we’re on a journey back to 15.5 million to 16 million units” as soon as 2013, he said.
--Editors: Jamie Butters, Young-Sam Cho.
To contact the reporters on this story: Craig Trudell in Detroit at ctrudell1@bloomberg.net; Jeff Green in Detroit at jgreen16@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
