US, European, auto buyers focus on price

US autos Feb11.pngUS auto sales disappointed again last month. As the chart shows, January (red square) came in well below the 1.1m level that was normal during the Boom years. And even this 819k sales level required major increases in incentives.

GM, of course, was focused on stabilising its stock price after the IPO, so it needed to report an encouraging number. But even so, its sales of 179k were only achieved by near record discounts of $3762 per auto. This was up $507k from December’s already high level.

This is worrying from a chemical industry viewpoint. If Detroit is busy reducing its prices, it makes it much harder to push through the cost increases required by higher oil and raw material costs.

Separately, an interesting article in the Wall Street Journal suggests auto manufacturers are seeing major changes in consumer buying patterns. It reports that 25% of Renault’s global sales are now of low-cost models.

These were introduced in 2004 to target emerging markets such as India. But they are now increasingly popular in developed markets. 50% of low-cost sales last year were in Europe, where prices start at €7600 ($10300) versus standard models such as the Clio at €14k.

This seems further evidence for the blog’s theory that demand patterns are seeing major changes as we enter the ‘new normal’.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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