United States Autos Report

Data from the US Department of Transport shows that the government's 'cash-for-clunkers' scrappage scheme was largely successful in stimulating new vehicle sales. Of the US$3bn allocated to the scheme by the government, dealers submitted applications for rebates worth US$2.88bn from sales of 690,114 vehicles. The effect on the market for the seven months to July is more diluted, however.

Total sales are down 32.1% y-o-y, not far below the 35% fall reported for H109. Moreover, while the industry is braced for more conservative results in the remaining months of 2009, and possibly heading into 2010 as the bulk of the scrappage sales are thought to have been brought forward due to the incentive, the market's contraction looks set to continue.

The scheme has created what BMI believes is an unsustainable spike in sales and it cannot be relied upon for a complete recovery, despite the massive take-up rate, and BMI stands by its forecast for sales of 10.4mn units in 2009. However, we have revised our production forecast for 2009 downwards to show a decline of at least 30%, after output for H109 fell 52.5% to 2.28mn units. By 2011, we expect output to increase steadily related to alternative fuel projects. The new national emission standards and the Department of Energy grants for manufacturers developing fuel-efficient vehicles should see increased activity in the production industry, particularly in the area of electric vehicles.

Although the US still ranks highly in BMI's Business Environment Ratings, this is largely due to its high scores for Country Structure and Country Risk as one of the more stable markets. Where the market falls down in relation to developing economies is its lack of growth potential. Vehicle ownership is much higher and the market more saturated as a result. The production side of the industry, meanwhile, comes under threat as carmakers find it cheaper to produce overseas. General Motors Company (GM) has already proposed importing foreign-built cars to the US as part of its restructuring strategy.

GM is looking to recover a competitive edge, after sales for the seven months to July fell 37.7%. The company still holds first place with a market share of 19.6%, but its dominance in manufacturing terms has been challenged as Ford Motor produced more light vehicles in North America in H109.

The scrappage scheme's success in terms of supporting domestic brands also came into question as Toyota Motor claimed the most new vehicle sales under the cash-for-clunkers scheme. Toyota accounted for 19.4% of all trade-in sales, ahead of GM on 17.6%. Ford Motor beat Honda Motor to third with 14.4% of new sales under the scheme, while the Japanese brand claimed 13%. Chrysler, however, was back in seventh with just 6.6% of the scheme's sales.