Business Features
Emerging Asian, German carmakers to crash US comeback party (Feature)
By Chris Cermak Jan 10, 2011, 3:24 GMT
Detroit - US carmakers may be on the rise again after flirting with disaster, but competition on their home turf will only grow in the coming years for the world's most lucrative car market.
The challenge is coming from some unlikely places, including a move towards US-based production by Germany's Volkswagen, and new threats from emerging Asian powers like South Korea and even China.
The goals of these relative newcomers have gained the attention of US and Japanese carmakers that have long had a stranglehold on the North American market. The battle was evident with the launch of more than 30 world debuts at Detroit's annual auto show on Monday.
'I think that all the competitors are getting stronger,' Vicki Poponi, who heads US product development for Japan's Honda, said in an interview. 'There's no bad product in the US any longer.'
The push comes even as the US car market struggles to return to its heady days of 2007 and earlier, when consumers bought more than 16 million vehicles. Sales plummeted to 10.4 million in 2009 as the world went into recession and recovered to 11.6 million last year.
But the recovery of sales will continue to be slow, and the slide means the US is no longer the world's largest car market. Fast- growing China sold 15 million vehicles in 2010, and not even one- tenth of the population owns a car.
And yet, even for some of China's own carmakers, the prospect of trying to establish their brand in the United States is becoming simply too enticing to avoid.
Michael Austin, vice president of the US division of China's BYD Auto, said part of the lure is that US consumers are regarded as the most discerning in the world. That means establishing a brand in the US, even at a low level, will help with sales back home.
'If you make it in the US, you make it anywhere,' said Austin, as BYD aims to be the first Chinese carmaker to break into the US market in 2012 with a fleet of hybrid and electric cars.
Austin is hoping to follow the path set by the South Korean Hyundai-Kia alliance, which after a disastrous launch in the US market in the early 1990s has managed to establish itself as a viable alternative to US and Japanese manufacturers.
Hyundai broke the 500,000 vehicle mark in 2010 as it posted a sales increase of nearly 24 per cent, the largest of any major carmaker in the United States. Its Sonata sedan was runner-up at the Detroit auto show's car of the year award on Monday.
Michael O'Brian, head of Hyundai's product development in the US, seems to acknowledge his company learned the hard way that forcing yourself on US consumers before you are ready can set back a company for many years.
'We've learned that, above all else, quality is what allows us to enter this market effectively,' O'Brian said in an interview. 'It's taken us some time to learn that. I think our success now is really just an indication of the progress we've made there.'
Volkswagen, which has designs on becoming the world's largest carmaker by 2018, hopes to make the next major breakthrough in the United States. It announced plans Monday to produce a car in the US for the first time since the 1980s, unveiling a cheaper and larger version of its mid-size Passat sedan, which will compete against Hyundai's Sonata and the top-selling Toyota Camry.
All this presents a major challenge to the so-called Big Three in the United States, which have only just begun to make a comeback after a near-collapse in 2009. General Motors, the largest US carmaker, saw its sales increase about 7 per cent to 2.2 million in 2010 after going through a managed bankruptcy the previous year.
'The next five years will be likely more competitive than the last five years,' said Stephen Girsky, GM's vice chairman of corporate strategy and business development. 'This is going to be a difficult world and we need to go into this with our eyes open.'
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