The US: a niche passenger car market

By: Dr Peter Wells, Tuesday, September 07, 2010,

AutomotiveWorld.com

Sales of new cars in China grew by 59.3% in August 2010 compared with August 2009. In the meantime, light vehicle sales in the US fell by 21% over the corresponding period. Put simply, the Chinese market is romping away at a seemingly unstoppable rate, while that in the US continues to dwindle now that government incentive support has been withdrawn.

In sheer numbers terms alone, therefore, the Chinese market is the largest and one of the fastest-growing in the world; with production figures that are equally impressive. But the marginalisation of the US is about more than the numbers alone.

the Chinese market is romping away at a seemingly unstoppable rate, while that in the US continues to dwindle now that government incentive support has been withdrawn

Essentially, the US has long been a market that is quite distinct from others around the world. This has been evident in terms of features such as the model mix, for example, and the tolerance of rather fuel-inefficient vehicles. There has long been an emphasis on vehicle size and on 'value for money', rather than technological innovation and high quality materials, and this too has tended to mean that definitions of 'quality' in the US market are rather different to those elsewhere. Even the practice of buying cars 'off the lot' is really a US phenomenon. Unsurprisingly, exports of cars built in and for the US market have tended to be marginal also, because the rest of the world had different priorities and preferences.

What has changed is that in the past the US was also the biggest market in the world by some way, and hence this predilection for catering for local tastes and values could be justified. This is no longer the case. The US market cannot any longer sustain its position as an outlier in world market terms, at least not at the very low prices charged for new vehicles that have historically been the case.

The US market cannot any longer sustain its position as an outlier in world market terms

So as the US comes to terms politically and economically with the end of its world domination, so too must the automotive industry. Ultimately, this also means that consumers in the US will also have to adjust, and get used to the idea that cars are not actually being designed for them any more. It may not matter any more if a particular OEM decides that building or selling cars in the US is not a priority. The US market may be more trouble than it is worth, as in the future the attention shifts to China and other emergent markets. Increasingly, US and European and Japanese vehicle manufacturers are finding their revenues and their profits determined largely by what happens in China.

The future consequences of all of this are unknown. In the longer term even opinion pieces such as this one will no longer reach the intended audience because of being written in English. We are witnessing a profound shift in geo-political and economic terms, in which the automotive industry is but a part. But we could indeed also be seeing the emergence of a time when the US market, once the powerhouse of the global automotive industry, is but a quiet backwater with some rather quaint old-fashioned tastes.

Dr Peter Wells is a Reader at Cardiff Business School, where he is a Co-Director of the Centre for Automotive Industry Research and leads the automotive industry research programme within BRASS, also in Cardiff University. Dr Wells is also a director of AutomotiveWorld.com's sister website AWPresenter.com. He can be contacted on wellspe@cardiff.ac.uk.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.

Published on Tuesday, September 07, 2010