Even as the US market for new automobiles remains strong by historical standards, the fortunes of industry participants vary widely and the Big Three automakers overall will lose market share to foreign carmakers, principally the Asian brands, according to Standard & Poor’s (S&P) half-yearly survey on the automobile industry.
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S&P currently projects that US light vehicle sales volume will rise 0.2% to 16.9 million units in 2005, from 16.87 million in 2004 — reflecting its forecast for stronger growth in the US economy, an improved stock market, a lower unemployment rate, and rising consumer confidence.
S&P’s near-term outlook for the relative performance of the Big Three automakers is cautious, with the highly profitable light truck, minivan, and SUV segment of special concern. Once dominated by the Big Three, this segment faces increasing pricing pressure from successful foreign makers as well as a shift to smaller, newer, and more fuel-efficient vehicles.
S&P expects the Big Three’s market share and profit margins in this sector to decline in coming periods.
“The light vehicle segment has up until now been a bastion of profitability for American manufacturers,” said Efraim Levy, autos and auto parts analyst at S&P’s equity research services. “We anticipate that the category will continue to see the effects of heightened competition, with increased pricing pressure and discounting.”
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