Asian auto manufacturers racing ahead…..

In 2008 the manufacturers built just over 16 million vehicles but sold less than 14 million. This deficit in sales caused a lot of changes in the auto industry and we will be feeling this pinch for a while yet. Before 2008 we had just over 1.1 million workers directly dependant on the auto industry, currently we have just over 561,000 employed.

As the legacy manufacturers are seeing decline in sales the new comers Hyundai and Kia are making big inroads on the market place. These two manufacturers have seen increase in sales for every period in 2008 and 2009 when the traditional companies saw significant decline in sales. We saw a contraction of total vehicle sales of US$84 billion from 2007 to 2008 but average sale price of vehicles remained almost the same. Remembering that the industry built just over 16 million units in 2008 and sold less than 14 million units, and with the corresponding figures in 2009 being 9 million and 10 million, there is still a huge inventory surplus on the lots. Predictions of 12 million units sales will still therefore keep the production numbers way below the 2008 16 million.

Whilst the legacy manufacturers are reeling with high inventory the two new comers Kia and Hyundai are actually building units to meet demand. They have a much leaner dealership network and lower cost to market. The legacy manufacturers including Toyota is struggling to keep cost down and will be cutting incentives to dealers. In the mid 20th century shoes were bought out of necessity and only a pair was normally needed. Because of this all across the US you could find shoe repair shops because shoes had to have a longer life. In the 1980’s there was a shift in shoe purchases. Brazil entered the market with cheap leather shoes and we have not seen shoe repair shops since as shoes are now disposable. Now shoes are bought as accessory rather than a necessity. One has to have different colors etc. So let us see what is to come in the way passenger vehicles will be sold. As we prepare for the new entrants to the market, we must also be prepared for a new way of buying vehicles. The four new entrants to the market will be Geely, Tata, Mahindra and Chery. Tata is an Indian Conglomerate that owns Jaguar and will enter the market with a rich set of vehicles including but not limited to the Nano and Xenon. These vehicles are built to meet all prescribed health and safety requirements. The only reason Tata has not entered the market yet has to do with production controls and what marketing methodology they will follow. Mahindra is known to produce some very striking vehicles. They are a major supplier of all kinds of vehicles to the Indian Military and Para Military. Mahindra sells Farm Vehicles worldwide. They will enter the Market with their Pickups and SUV’s The name ''Geely'' is derived from a Chinese language phrase that means, ''I am lucky.' The entrance into the US market would have to be well planned with some luck to succeed. The Geely vehicle will be the 7151 CK but I am pretty sure that it will be renamed to something more lucky. Chery is also a very successful Chinese manufacturer that has tried many times before to enter the US market. The latest being a partnership with Chrysler that fell apart in 2008 when the auto industry started to strain under the economic conditions. Chery will surely enter the market with its own version of the cross over vehicles.