US auto companies lack pricing power

US autos Mar11.pngFebruary’s data on US auto sales contained good news, and not such good news, for the chemical industry.

• The good news was that sales were relatively strong, as the chart shows (red line), although still below levels seen in the 2005-8 period (black line).
• And higher oil prices are supporting sales of more efficient autos. This should increase polymer sales, as steel and glass is replaced.

• The not such good news was that companies are still using heavy discounts to boost sales:
o GM continued to offer major incentives, plus cheap financing.
o Toyota was also offering large incentives, which will no doubt continue into March, as it seeks to counter news of a further 2.2 million vehicle recall.

This suggests the US auto industry is still suffering from a lack of pricing power, in spite of all the $bns spent in restructuring. This will not make it easy for chemical companies to push through further feedstock-related increases for its raw materials.

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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