Car Glut Debilitates Chinese Car Industry. Now Wait Until You Get To Detroit
Two days ago, Bloomberg brought harrowing news:
“Chinese dealers are struggling with the rising number of unsold cars that’s threatening to deepen price cuts. Dealerships for Honda Motor Co., Chery Automobile Co., BYD Co. and Geely carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts.”
Automotive News made the matter the opener of its Friday video newscast. Apparently, the sky is soon to fall in China. The situation is even more dramatic elsewhere.
In Detroit.
A month ago, we wrote about inventory levels at U.S. dealers. Here, 2 months of supply are considered as normal, and the average stood at 54 days when we wrote the story. The Detroit 3 however jointly had an average of 70 days’ of supply sitting on the lots. General Motors had nearly three months of supply.
If 45 days of supply foreshadow debilitating price cuts in China, what does 86 days of GM supply foreshadow in Detroit?
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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That's why the Japanese approach to having limited trim lines makes much more business sense, although I can understand how the truck department needs to work differently especially for the work crowd. If they could approach 25 mpg on the highway, I wouldn't mind a Lariat or Sierra for mid-20's, even if they're 2011s. I drive my cars forever (and 200k+ miles), so I could care less about depreciation....
As many have said before, you can't lump a GM total inventory up against Honda, who don't make PUs and vehicles for upfitters. You need a lot more F150s than Accords that have a couple colors and options vs the F150. Looking just at cars, not LT, Ward's sees Detroit improving last month. Queue the Bloomberg headline!! "Detroit improves inventory, Asians in touble due to skyrocketing inventory!!" April March April 2012 2012 2011 CHRYSLER TOTAL 37 46 46 FORD TOTAL 53 48 40 GM TOTAL 65 69 48 BIG THREE TOTAL 54 56 45 ASIA/PAC TOTAL 40 37 39 EUROPE TOTAL 44 49 50 TOTAL CARS 45 45 42