The cracks are beginning to appear in the US car market. Car sales in October were 3.3% down on last year at 692,787 from 716,424. That took growth for the first ten months to 7.1% at 7,422,823 from 6,929,228. The slight
downturn lowered the annualised selling rate to 8.68 million from 8.7 million in September. That was only the second downturn in eleven months and whether or not it will be followed by drops sufficient to bring the market to meet our full-year forecast of 8.6 million remains to be seen. The market will have to drop by 6.1% over the closing two months for the forecast to be spot on. To quite a degree the full-year total will depend more on the vehicle manufacturers than on the car buying public. Incentives will keep the
market higher than our prediction, but they will only leave a bigger vacuum for next year when we believe sales will fall further, probably to around 8.25 million.

The pressures are clearest at the top of
the table where four of the top five players in the field suffered sharp downturns for the
month, all of them registering double-digit declines, considerably in excess of the sector
average. The exception was Toyota who raised sales by 7.7% for the month to 70,650 from
65,581, but with all of the increase coming from the new Celica. In October 1998, when the
old Celica was clearly past its sell-by date, sales amounted to only 162 units, but the
new model impacted with 4,198 in October 1999. Although some of those were demonstrator
models and pre-registrations, Celica has clearly arrived with a much bigger bang than
might have been expected, which is good news for Toyota but also indicative of the ongoing
search by the man in the street for something that is different from the run of the mill
product offering.

Seasoned observers of the US car market
will know that most forecasters have been predicting that the market would go into sharp
decline for the past two or three years, and clearly, one day they will be right.
Long-term readers of WAIT will know that at times we have stood alone at the dawn of a new
year in stating that we believed that the market would continue to grow. We now say that a
decline is about to take place, not because the law of averages might be about to kick in,
but because we have seen for quite some time that the sector has been maintained at an
artificial level by manufacturers rather than by consumers.

Any manufacturer with something new or
something a bit different to show is still reeling in the willing buyer, and it is this
search for a different way to express individuality that has partly been the driving force
behind rampant growth in the light truck sector. Most of the Europeans have done well, but
Volkswagen in particular. General Motors has accounted for 145,000 of the 500,000 extra
sales that have been racked up year to date (which is not surprising given the conditions
that GM were contending with this time last year), but Volkswagen – a minnow in
comparison in this market – has gained nearly 78,500 new admirers. You have to go
back 25 years to find a time of such success for VW in North America, and that was when
they were building the old Beetle at Westmoreland. Now it is the Mexican-sourced new
Beetle that kick-started the VW revival, although that impact is now softening and it is
the impressive Passat and the Jetta that are raking in the gains of late.

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It is not a surprise that the Passat is
doing so well in the US market. Of late, Volkswagen have elected to go for a distinct
family look in the design of its passenger cars, and this has taken out some of the
individuality in their models. This is not necessarily a bad thing, but it does appeal to
some people more than to others. The latest Passat appears to be somewhat toned down in
comparison with its predecessor, and it has now developed more in line with American
tastes. To illustrate the point, the top selling car in the US market to date is the
Toyota Camry with 386,003 sold in a market of 7.4 million units. We have driven the Camry
and could see why it has such high appeal on the roads of North America. Yet the model has
sold only 2,900 units in the whole of Europe in the first 9 months of 1999. That is in a
market of 11.86 million units in that period. Camry does not appeal to European tastes in
design, and Passat, to a degree, has leaned in that direction with the result that sales
in Europe to date are beginning to slip, with sharper models like the Lupo proving to be
more attractive.

Hyundai is also recording startling growth
and a return to the glories of yesteryear. Hyundai has lifted sales by an incredible 74.4%
YTD to 136,790 from 78,441 and has moved five places up the table as a result. Hyundai has
been in desperate need of overseas revenue and so have taken advantage of currency
fluctuations in order to boost sales. But they have also considerably improved their
products since the last time that they were in the ascendancy and stand a much better
chance of holding on to market share this time around. Just to put matters into context,
the 137,000 units sold by Hyundai in the market to date beats every full year total that
they have recorded since way back in 1989 when they sold 183,261.