My Take on Auto Industry

Structural changes are taking place in global auto industry that destined to turn the US auto market from a leader to a laggard.

In the United States, General Motors Corp and Chrysler Group are losing market share because of the government takeover. For Chrysler, the partnership with Fiat SpA is unlikely to help much. Fiat is among the weakest of the European companies and has not been competitive in the United States since the 1980s. The US market is undoubtedly moving towards smaller automobiles. The trend is being fuelled by the new Corporate Average Fuel Economy (CAFÉ) standards for 2015 and it seems unlikely that the partnership will have the models to compete.

General Motors has the model range to compete in the United States. However, GM is doing much better in China, thanks largely to its joint-venture with Shanghai Automotive Industry Corp. Given the growth of that market, it will probably it makes most economic sense for General Motor to become Chinese-owned. Politics may delay this, but probably only for a few years.

Ford Motors Co has picked up market share in the United States from GM and Chrsyler’s problems and it may be in a good position here in the large US market – as the most effective manufacturer of the large automobiles that Americans continue to prefer – no matter what the government tells Ford to do.

Outside the United States, European manufacturers will find themselves increasingly confined to the luxury end of the market. On the other hand, Japanese and Korean manufacturers will continue to dominate their domestic markets and will continue to do well in the United States and Europe and in countries, where they have been able to establish viable local manufacturing operations and lower labour costs.

India’s Tata Motors Ltd is the newly emerging global auto elite. Its for-the-masses “Nano” has been well received and that could force other manufacturers to produce equivalent low-price models. It could expand the market’s size in India and other emerging markets much as Ford’s Model T did after its introduction in 1908 or Volkswagen AG ‘Bettle’ did in the 1950s and 1960s.

On the other hand, China’ top carmakers – Chery Automobile Co, Geely Automobile Holdings and Great Wall Motor Co are among companies that will see most growth in the automotive market of the decade to come.

Most muscle will be in Asia, investors should not be surprised.