Chrysler CEO, Sergio Marchionne, has issued a wake-up call to Western auto companies about the growth of China’s exports. He warns that they “can’t count on dramatic growth in Asia to drive prosperity“, and suggests that China’s plans to increase auto exports pose an “enormous” risk.
Meanwhile, US auto sales disappointed again in July. As the chart shows (red square), they have been back below the 1.1 million/month level since May. And optimism over a seasonal pick-up in August is fading.
Annualised sales this year are only 12.2 million. This is 27% down versus 2000-7′s average of 16.8m. And thus the industry is getting ready to cut prices from current record levels in an effort to stimulate sales.
One problem is that Americans’ love affair with autos has faded. High prices led to a 1.9% reduction in July’s gasoline sales versus 2010. And vehicle miles travelled January-May were the lowest level since 2004.
The move towards the New Normal is also having a major impact. Americans are already spending less, and saving more, as the BabyBoomers (those born between 1946-70) enter the 55+ age group.
The US savings rate was 5.4% in July, versus ~0% by the end of the 1982-2007 supercycle. Sales are therefore likely to remain lower. especially as lending criteria become stricter and fears over job security rise.