Transport Theory

Weak dollar may boost US auto industry

Posting in Technology

Rising import prices mean US buyers are more likely to opt for domestic cars.

The weak state of the dollar may actually help America's auto industry.

The U.S. currency hit a post-WWII low of 75.95 yen in August, as well as a 17-month low against the euro ($1.4940) in May. This has made imported cars more expensive for American buyers - they are selling at the highest price premium to domestically-produced cars in 12 years.

A new imported vehicle sold for an average of $31,536 in August 2011, according to the U.S. Bureau of Economic Analysis, $7,614 more than the average U.S.-built car. The last time imported cars cost this much more than American cars was in December 1999.

Interestingly, this discrepancy has made cheaper cars less profitable for foreign automakers to import to the U.S., while luxury imports have actually increased.

"It's very hard to import, especially from Asia, small cars right now because of where the dollar is," Paul Ballew, chief economist for National Mutual Insurance Company told Automotive News. "If you look at luxury-car sales the last few months, they're up double-digits from a year ago while small cars are down more than 20 percent," he said.

Meanwhile, according to J.D. Power & Associates as well as Consumer Reports, in recent years U.S. automakers GM and Ford have improved the quality of their vehicles, such that the difference in the number of problems Toyota, Ford, and Chevrolet owners encountered with their cars was "statistically insignificant."

Taken together, these factors could make U.S. consumers more likely to buy American. So far, GM and Ford's market shares have risen slightly, with GM increasing its market share by 1 point to 20 percent through September, and Ford's share rising 0.1 percent to 16.7 percent.

Add to that the fact that automakers like Volkswagen and BMW have recently expanded U.S.-based production capacity, and the outlook for US auto manufacturing starts to look pretty good.

Photo: Flickr/NNECAPA

via [Automotive News]

Channtal Fleischfresser

Contributing Editor

Contributing Editor Channtal Fleischfresser has worked for The Economist, WNET/Channel 13, Al Jazeera English, Wall Street Journal and Associated Press. She holds degrees from the University of Pennsylvania and the Columbia University Graduate School of Journalism. She is based in New York. Follow her on Twitter. Disclosure