Passenger car sales rose by
9.1% in February to 673,682 from 617,613. That was the best February for three years and
took the market after two months trading to 6.8% ahead at 1,223,692 from 1,145,901. This
is quite a surprise to many observers, and it is difficult to accept that the current
trend can continue. Sales have been on the upward trail for the past five months and have
convinced a few industry watchers that 1999 is set to show sustained growth, but we
can’t subscribe to that.

The market has just
completed four consecutive years of falling sales and a pause for breath would not come
amiss. But what has happened in the year to date is too good to be true. For a start the
annualised selling rate has now risen to 8.3 million – which is higher than we would
expect the full year result to display – but more to the point, only once in the last
decade and twice in the last 20 years have January and February sales combined amounted to
less than 14% of the full year total. On that basis the results to date indicate a full
year 1999 total of 8.7 million, and we simply do not see that happening, although Ford has
just upgraded its forecast for 1999 by 500,000 units.

There is evidence to
suggest that the car market is currently higher than the underlying economic trend in the
US would support. A number of factors have combined to produce a false feel good
atmosphere, and whilst this is now expected to last for another month or so, ultimately we
expect this bubble to burst and for the market to fall off as the year progresses. For now
we will stick to our original belief that the market will not finish much higher than 8.2
million units, especially if light truck demand remains buoyant, but we do concede that if
the market continues to confound, then we will have to raise the level of our

General Motors has set out
its stall. The US giant wants to recapture lost market share and is using every trick in
the book to achieve that aim. Ultimately the bottom line result will have to be considered
and the full powered blast of today may prove unsustainable, but for the moment GM is
happy to see share back up above the 30% mark. It appears to be Ford who have borne the
brunt of the GM charge, sales falling 9.1% YTD at 216,335 from 237,921, whilst GM Group
sales reached 374,960 from 330,866.

The recent formation of
DaimlerChrysler seems to have done much more than simply spin the automotive world on its
tail, with every major player now looking to add to the house jewels. For Chrysler the rot
seems to have stopped. Chrysler sold 832,633 cars in 1996, then saw sales begin to tumble
towards the 700,000 mark until late in 1998. Now sales are moving back in the right
direction with a 10.8% gain for the first two months, to 126,400 from 113,921.

Volkswagen have continued
where they left off in 1998, especially with regard to Beetle sales. The Beetle is still
being well received in North America, but there is a backlash of feeling building up in
some European countries – Germany in particular – where the old Beetle is still
remembered as a cheap and cheerful runabout, and where today’s asking price for the
new Beetle is out of kink with perceptions.

The other noteworthy
occurrence is the arrival on the US scene of Daewoo of South Korea, with the statistics
showing 1,410 sales to date. However, there is a strong possibility that very few of those
cars are as yet in the hands of genuine owners, and it will take some months yet before
any judgement can be made based on Daewoo’s US sales.