The Auto Writer

For an untold number of years the US consumer has been the leading purchaser of new cars. That’s one of the reasons why so many foreign manufacturers have entered the US market — a lucrative one at that — where customers often demand well optioned cars resulting in hefty profit margins for manufacturers.

US Down, China Up

Commencing in 2007, US cars sales began to slide, falling off of a precipice by the end of 2008 as the worst recession since the Great Depression deepened. Annual car sales which had at one time topped 17 million units dropped below 10 million vehicles sold, sinking to a level not seen since the early 1980s. During the time that the US market was contracting, car sales in China began to surge past eight, nine and then ten million units annually, reaching toward 12 million cars according to the most recent data.

It doesn’t take a math genius to realize that China is ahead of the US. What some people probably don’t realize is that the Asian giant isn’t likely to relinquish that spot. Ever.

Even if the US market eventually recovers to its highest levels, by that time China may be so far out of reach that it won’t matter. Some analysts believe that the US market has experienced a permanent correction, one where consumers will keep their cars longer resulting in fewer sales annually. Personally, I don’t support that reasoning. I guess we’ll have to wait until 2015 to find out.

China Tops For GM

The Chinese sales surge has been good news for an industry rocked by a deep recession and the collapse of General Motors, Chrysler and several auto parts suppliers. GM, which has been losing market share in the US, managed to sell 181,148 units in September 2009 in China, beating US sales by 26,000 units. This was the first time in the company’s history that the US market wasn’t first for GM – might it soon become apparent that GM is more a Chinese car manufacturer than an American one? Fritz Henderson seems to think so.

China has been priming the new car market by offering rebates and encouraging cash hoarding consumers to make purchases. For many recent buyers the car that they purchased was their first one ever and, unlike in India where the bare bones Tata Nano is a hot seller, Chinese consumers have similar tastes as their American counterparts. Indeed, Mercedes and BMW are thriving in China as is Volkswagen whose Audi operation is booming.

China may not be able to sustain its rapid growth without continued government support. However, their forecast for 2010 shows further gains with GM itself expecting to pick up market share as it outraces its competitors.

Perhaps GM’s recovery won’t be based on how it performs in the US, rather on what the automaker is able to do in emerging markets. If that’s the case, then Toyota may soon find itself returning the production leader mantle to GM.