Stubbornly high unemployment, poor consumer confidence and even high petrol
prices were not enough to keep buyers away from showrooms in October as
sales hit the highest level in eight months and rose 9 per cent year-to-date.
Automakers – or at least those not from earthquake-crimped Japan – are
appropriately upbeat as this was not one of those suspiciously strong months
that either rob sales from the future through incentives or achieve them at
the cost of lousy margins.
American carmakers
What is more, bona fide retail sales, as opposed to lower quality fleet deals,
predominated according to Barclays Capital. More profitable light trucks, a
strength of Detroit’s “Big Three”, made up a growing share as well, boosting
American carmakers’ collective unit sales by 15 per cent year-on-year.
Chrysler and non-Japanese foreign sellers were far stronger than General
Motors and Ford though.
Is the strength sustainable? At a seasonally-adjusted rate of 13.3m a year,
sales still remain well below the easy credit heyday of 16-17m and just
800,000 or so ahead of the replacement rate – the point at which America’s
car fleet does not get any older.
Using pre-2008 levels as a proxy makes no sense, however, because so much
overhead has been stripped out of the US industry. General Motors and Ford
have booked combined profits of $15bn over the past 12 months and, with
their balance sheets repaired, would no longer be sunk by a normal
recession.
Price competition
A more relevant question for Detroit is whether it can hang on to
post-earthquake market share gains and do so without a return to ruinous
price competition.
Americans can be counted upon to covet shiny new cars but buying American is a
less certain proposition.
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