Friday, December 23, 2005

2006 Auto Industry Outlook from WSJ

Five issues identified in the WSJ 2006 Auto Industry Outlook are:
* Future of GM
* Fuel Economy (and Hybrids)
* Boom in Luxury car segment
* Resurgence (?) of small (compact?) cars, and
* Crossovers are the new SUVs

It is clear that US auto industry is in for some rough weather over the next two or three years. In that time, GM and Ford will continue to downsize and will perhaps emerge as nimbler organizations. GM might be the starve off chapter 11 following the sale of GMAC.

Arrival of Camry hybrid model and several hybrid models as well as smaller more fuel efficient gasoline ICE vehicles will indeed challenge the US consumers to put their money where their mouth is. On the other hand, if we see another year of volatility in oil prices like 2005, these more fuel efficient vehicles may indeed become popular. There is also likely to be a move in both the Congress on passenger car CAFE standards as well as NHTSA on light-truck CAFE standards. I will be watching this more closely than other issues.

I really don't have anything to say about the luxury car sales.

As for the crossovers, the trend has been clear now for the last couple of years. Large SUV sales are in a big decline after having peaked in 2001/2002. Crossovers, which are cars disguised as SUVs, having been growing in popularity already. With high gasoline prices ($ 2.35 a gallon on average for the year?) we may see that trend accelerate.

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