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Current automotive market
Current market make up of the global automotive industry:
Impact on the American economy
Not so long ago, the death knell of General Motors was being sounded by many economists. However, GM has rebounded, largely thanks to its international presence, particularly in Indian, China and Russia. "General Motors [has] appeared to regain its one-time perch as the world's largest automaker. With 2011 sales of more than 9 million vehicles, it soared past Toyota, which plunged from first to fourth...as well as Volkswagen" (Eisenstein 2012). GM's sales dominate developing world nations, which shows a great deal of promise for sustained growth given that these nations' middle class populations are expanding and there are high levels of aspirational consumption. Many families have never owned cars and now desire to make their first purchase. The international market could prove more important for all Detroit car manufacturers than the domestic market.
GM sales rose 59% in India, 21% in Russia and 11% in China in 2011. "Just two years ago GM's China sales were growing at an annual pace of almost 50%" but sales have been leveling (Shirouzu 2012). One problem is that Beijing's city government has begun to more strictly limit the issuing of license plates for new cars: "it will issue a maximum of 240,000 license plates for new cars and microvans this year, about a third of the 750,000 expected for last year" to "combat congestion" (Zhang & Shirouzu 2012).
GM's astounding growth globally demonstrates how merely looking at an automotive company in terms of its sales in its country of origin does not paint a complete picture of its financial health. Purchases of SUVs overall have been increasing in the developing world, once again contradicting the demonizing of American car-companies as unthinkingly churning out SUVs that no one needs or wants. GM was particularly criticized for its lack of creativity during congressional debate over the bailout. But SUVs are beloved by the rising middle class, particularly in China. "Sales of sport utility vehicles (SUVs) in China surged 101.27%" in 2010 (China's SUV sales surge 101% to 1.33M units in 2010, 2012, In Auto News). Ford, eager to make up the ground it has lost to its American rival, has also begun to roll out several new brands (Klayman 2012).
Although some consumers in the developed world are concerned about rising gas prices, "in China, size matters...People want to have a car that shows off their status in society. No one wants to buy small" (Cha 2008). More Buicks are sold in China than in the United States. "A small car is for people with money problems or if they want it as an extra car to give to their wives, daughters or girlfriends to go buy food' (Cha 2008). Originally it was predicted that China's overcrowded streets would lead to demand for smaller cars, a prediction that proved to be erroneous. "As recently as a few years ago, automakers were betting that the future of the Chinese car market was in small vehicles that could easily maneuver the narrow alleyways of its ancient cities. Then they discovered a quirk in Chinese consumers' tastes" (Cha 2008). Additionally, its attraction for women -- China's equivalent of 'soccer moms' -- is also a strong draw (Klayman 2012).
Internationally, "GM's sales results speak to 'a very well balanced strategy' the company is executing in emerging markets around the world (Shirouzu 2012). Rivals Volkswagen, Ford and Toyota have struggled, given "Volkswagen's limited presence in India and Ford and Toyota's struggle to penetrate the China market and boost sales" (Shirouzu 2012). But this does not mean that Toyota's small vehicles can be entirely discounted. Overall, "the Toyota Prius going strong, etching its mainstream status by becoming the world's best-selling car for the first three months of 2012... Finishing just behind the Toyota Corolla, which sold 300,800 units and the Ford Focus -- which came in just behind its Japanese rival with 277,000 Focus sales -- the Prius managed to finish third with a bronze medal deserving 247,230 in total global sales" (Iliaifar 2012, Toyota). In the developed world, concerns about gas prices remain omnipresent, which accounts for the surge in sales of the Prius. But long-term demand trends for hybrids remain questionable. Statistics show that even consumers who buy one hybrid seldom…[continue]
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Other monetary policies that can affect the automotive industry in the U.S. include mandated price ceilings on the price of gasoline (Mankiw, 2004). These approaches, though, have not proven particularly effective in the past and created more problems than they solved. In this regard, this author also emphasizes that, "Eventually, the laws regulating the price of gasoline were repealed. Lawmakers came to understand that they were partly responsible for the
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