A year ago it seemed the motor vehicle market – especially the luxury end – was doomed. The idea that Detroit's North American Car Show would be successful was unthinkable. Yet in February, 2013 the big manufacturers are again scrambling to get a piece of this multi-billion dollar industry.
Media rhetoric had the US done and dusted. Some States were considered nothing but deserted buildings in a once flourishing consumer-based economy. This couldn't be further from the reality. America is coming back and it is local consumers who are again 'driving' (sorry) much of the recovery.
Both the Dow Jones Industrial Average and the S&P 500 have reached their highest levels since 2007, when the Global Financial Crisis began. Domestic earnings have improved, aided by a weaker currency. (While the ‘currency war’ is hurting other economies - including Australia as discussed in last week’s article – our own ASX 200 has still managed to put some runs on the board).
We should be excited about the prosperity of US markets and in particular the performance of the car industry in what is a largely cyclical industry, as this reflects the underlying confidence of the consumers across the nation. Australians in particular should be excited as our performance often follows America’s.
New car sales in America reached a giddy 12.5 million in 2012 and it’s likely they will reach 15 million in 2013 and pass pre-GFC sales of what is essentially a luxury item. Put into perspective, that's more than one new car for every adult in Australia. It's a resurgence that is critical to the long-suffering economies of the mid-west states.
Unplanned or purposeful?
So much of America relies on the car industry. It’s resurrection could be the biggest win for the economy since the global financial crisis erupted. But there have been speed bumps along the way. Had the US Federal Reserve not deliberately devalued its currency, the viability of the car industry would be questionable, to say the least. But now, the weak US currency makes American manufactured cars attractive to international buyers and domestic demand for cars sold in other countries is limited.
At this week's North American Car Show, pick-ups (utes to you and me) received a lot of attention, a direct result of tradesmen enjoying the recovery in the housing market and new home sales. Pick-up sales in 2013 and beyond are expected to exceed other categories and car manufacturers are ready with more efficient – and even electric and hybrid models - available.
59 new automobiles were unveiled at the show, a sure sign that America is recovering and that consumer demand is improving. With the dollar and interest rates expected to remain at all-time-lows for the foreseeable future, 2013 looks bright for US markets and the economy as a whole.
Go America, Go Australia...