GM and Ford have revealed a welcome rise in US vehicle sales for last month. On closer inspection, the increase appears largely attributable to massive discounting drives. If US players continue with this low-price strategy in the long term, their Asian rivals are likely to reap the rewards.
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After a period of significant stagnation, results released by US car makers last Friday indicate that their fortunes may be changing. GM’s sales for June were a huge 41% higher than those for last year, buoyed by an increased uptake of its fuel-guzzling SUVs, minivans and pickups. Ford also saw an overall increase in sales for June, albeit to a lesser extent, selling 289,449 vehicles, a 0.7% increase on the previous year.
Despite this recent encouraging growth, US companies remain in the shadow of the large Asian players. For the month of June, both Toyota and Nissan posted steady double-digit growth, at 10.2% and 14% respectively. Nissan’s success was in part thanks to the popularity of its medium-sized Altima sedan and its new Pathfinder SUV. On a broader scale in the US market, Asian-made vehicles also benefit from a reputation for reliability compared to their US equivalents.
Though GM appears to be beating its Asian rivals in terms of sales at present, its success comes on the back of huge discounts, rather than notable improvements to its vehicles. A Deutsche Bank research note has described the Detroit giant’s latest sales drive as “likely to be the most expensive marketing programme ever run by GM”. Indeed, with margins being pushed through the floor, such a strategy is arguably unsustainable in the long term, especially since US manufacturers do not enjoy the same competitive advantage as their Asian rivals, which benefit from cheap labour and production costs within local markets.
US car producers may well be enjoying higher sales, yet this does not herald a new era of US competitiveness within the motor industry. Confronted with an ever broader and increasingly appealing spectrum of vehicles from Asian manufacturers, both GM and Ford face an uphill struggle over the next few years. To counter this, both need to look at improving their vehicles rather than simply competing on price. Equally, if US car makers continue to engage each other in price wars, it is their Asian competitors that are likely to benefit.
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By GlobalDataGlobal Automotive Manufacturers
SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
