Visitors to the recent Detroit Auto Show could not help but marvel at the skillfully engineered vehicles displayed by car manufacturers from around the world. The new Mercedes Benz C Class and Ford’s 2015 F-150 truck—constructed almost entirely out of aluminum, which reduces its weight by an impressive 700 pounds— were highlights of the show.
While analysts believe that this year will be a good year overall for the global automobile industry, with strong demand for new cars coming from the emerging markets, concerns over the fate of the U.S. market are now at the top of their list, and they expect the North American auto sector to face a more challenging year than expected.
Car sales in North America had increased significantly since the recession, but now, “we have seen inventories rising and pricing coming under pressure,” said Stephen Reitman, head of automotive equity sector research at Societe Generale in London, “so this is causing some concern.”
In 2013, approximatelty 15.6 million cars were sold in the U.S., said Jessica Caldwell, Senior Analyst and director of pricing and industry analysis for automobile research website edmunds.com. “That’s not too far from pre-recession levels, so now, there’s a fear that we might be returning to that old, unhealthy model, which was based on incentives and inventories and then eventually led to the bankruptcy of Ford and General Motors,” she said. “We’re not there, of course, but clearly there’s a question about how further growth can be achieved.”
On the other hand, production data from China is very strong, largely driven by double-digit growth in key European brands present there, Reitman said. Audi sales, for example, were up 37% in December, while Mercedes sales rose by 27% and Porsche’s by an impressive 71%.
“These are very good numbers and what’s interesting about them is that although some manufacturers of luxury goods had expressed their concern over China in light of the restrictions on gifting and gifts to officials, the premier car market there is going from strength to strength, and that’s defying the doomsayers,” Reitman said.