Asia is overtaking the United States as the largest market for auto sales, but the US will remain the more lucrative market for the next decade, a senior executive at General Motors said Thursday.
Overall industry sales in the Asia Pacific region are expected to surpass North America for the first time this year as they approach 21 million vehicles, said Paul Ballew, director of GM's global market and industry analysis.
US sales are currently on pace to reach between 16 and 17 million vehicles this year.
Growth in China, India and other emerging markets will push global auto sales to a record 70 million vehicles this year, Ballew said.
“If we go back to a decade ago, 80 percent of global sales were in the developed market of the US, Canada, Australia, Japan and Western Europe,” Ballew said in a conference call.
“So far this year it's about 62 percent.”
He said demand across Asia was still primarily for lower-margin compact cars, but noted a significant increase in demand for luxury vehicles.
“As these markets become more prosperous the buyers will become more aspirational,” Ballew predicted.
GM has been struggling to maintain domestic momentum of late, its sales slumped 24 percent in June, and has been overtaken by Japan's Toyota as the world's biggest auto company.
But even though margins in the United States have been falling amid increased competition and a sharp drop in demand for highly-profitable but fuel hungry sports utility vehicles, the US remains a key market, Ballew said.
“The US we anticipate will still be the most profitable market in the decade ahead and therefore you cannot be successful as a global vehicle manufacturer without being successful in the US,” he said.
“The real key is not to be dependant on the US while still being competitive in the US market.”
About 58 percent of GM's sales of 2.4 million vehicles in the second quarter came from outside the US market.
The automaker posted solid sales growth in all regions except for North America where sales were hit by a planned reduction in low-margin sales to rental car companies. GM saw its global market slip slightly to about 13 percent.
GM expects to sell over five million vehicles outside America for the first time in 2007, up 500,000 from a year ago, Ballew said.
This will more than make up for the losses in the United States, he said.
“We're on pace to reach our highest (sales) level since 1978 and our second highest in history,” Ballew said.
“If the US were hitting all cylinders this year we'd see another 800 or 900,000 units.”
While higher energy prices and tricky economic pressures are “tempering the growth just a bit” the global economic growth outlook remains “very favorable” and is expected to reach about 3.5 percent, down slightly from the four percent GDP growth posted in recent years, Ballew said.
Overall auto sales are expected to grow 15.5 percent this year in Latin America, Africa and the Middle East, eight percent in Asia/Pacific and two percent in Europe, he said.
“The US and German markets as well as a few others are certainly challenging and we're going to continue to focus on getting the business correct in those markets,” he said.
“But overall we feel like we're very well positioned from a competitive standpoint to take advantage of the growth.”
