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  • A crowded Market?

    Dec 17
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    FOR the past two years the Detroit motor show has been a dismal affair. But this year the parties were in full swing again. Helped by government bail-outs and with debt burdens lightened by bankruptcy, Chrysler and GM are back on their feet; Ford, the other member of Detroit’s Big Three, is thriving. It took America’s car industry 20 years and a world war to recover the three-quarters of production wiped out by the 1929 crash. By comparison, the aftermath of the latest recession has been surprisingly comfortable.

    Ominously for the locals, though, the biggest splash on opening day was made by a Volkswagen saloon, which is to be built in a new factory in Tennessee. Europe’s best big carmaker is taking aim at the heart of the American market for the first time in over 20 years. Its bold move is just one sign of growing fragmentation in a market once dominated by the Big Three and a small clutch of Japanese rivals.

    The recession sent car sales in America skidding from 16.5m in 2007 to just over 10m in 2009 (see chart, below). Since then the ride has been fairly smooth. Sales in December were equivalent to an annual rate of 12.7m cars and light trucks (sport-utility vehicles and the like), the best unaided performance since September 2008 when Lehman Brothers collapsed and credit markets froze. Industry-watchers are predicting a 10% rise this year. The most optimistic forecast sales of 14m. Analysts at Morgan Stanley, an investment bank, point to an improvement in the creditworthiness of buyers which is causing lenders to loosen their purse strings. Americans are even buying big, expensive vehicles again.

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