Saturday, January 5, 2013

Foreign Car Sales Surge In America

A Weak Yen Brings More Cars To America
Foreign car sales are surging in America while domestic auto makers have seen only moderate sales gains. The share of the market enjoyed by US makers continues to shrink. What is the meaning of this data? It might be interpreted that after all the chest thumping by Obama and those behind the bailout of the auto industry that the American public is less enthusiastic about the industries new products then initially hoped.

When Americans choose to purchase an automobile made in a foreign country they rob jobs from Americans and send our dollars abroad. When they use money printed by the Fed and scattered about by artificially low interest rates they add insult to injury. Yes, we continue to shoot ourselves in the foot by running both massive government and trade deficits at the same time. Considering that the industry still has far more capacity then necessary expect a bone crushing and competitive market going forward.

So what is at the root of this phenomena, is there a perception that foreign cars are just better, or are we just stupid?  Products made in America should be of competitive quality, yet the growth in sales does not support this notion. One theory is that we have not forgiven American car companies for abusing us, year after year, after year, with cars that were substandard. It is possible that I'm simply misinterpreting the data as I struggle to get my defective seat-belt to retract in my American vehicle.

I recent article in the Financial Times, Niall Furguson specks to currency wars and the huge drop in the value of the Japanese yen. Furguson presents a chart that surprised me, it shows a massive surge in the yen in 2007, this would of slowed their auto sales after that time. Now expect sales of Japanese brands to again pick up. This will put pressure on America auto makers, killing their margins as well as sales, the complaints are already flowing. Sales without profits is what got the "Big Three" into trouble, that situation will soon return.

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