Carmakers look to uncertain future

The US car of the year media conference during day one of the 2019 North American International Auto Show on Monday. The Hyundai luxury brand’s Genesis G70 was judged the car of the year. The utility of the year is the Hyundai Kona and truck of the year is Fiat-Chrysler’s Ram 1500 bakkie
The US car of the year media conference during day one of the 2019 North American International Auto Show on Monday. The Hyundai luxury brand’s Genesis G70 was judged the car of the year. The utility of the year is the Hyundai Kona and truck of the year is Fiat-Chrysler’s Ram 1500 bakkie
Image: AFP

The motor industry gathers in Detroit for the last winter edition of North America’s premier vehicle show, as carmakers grapple with a contracting market and uncertainty in the year ahead.

Concerns over the health of the global economy and a USits China trade war loomed over the North American International Auto Show, as it opened on Monday with the first five days dedicated to the media and industry insiders.

The show opens to the general public on Saturday.

While a number of major announcements were expected – including an anticipated strategic alliance between Ford and Volkswagen – there will be fewer vehicle manufacturers and new car unveilings, making it more subdued.

‘This is a transition year for the show. It’s emblematic of where the industry is’
Michelle Krebs
AUTOTRADER ANALYST

“This is a transition year for the Detroit show,” Autotrader analyst Michelle Krebs said.

“It’s kind of emblematic of where the industry is. We’re in a transition in the industry.”

GM kicked off the string of new car unveilings by debuting new Cadillac XT6 – a midsize crossover in line with similar SUVs from competing luxury carmakers.

GM aimed squarely at Tesla in releasing concept photos for a future Cadillac electric SUV.

The company said the luxury brand would be the first to employ an upcoming electric vehicle platform, but the time frame was not specified.

“Cadillac, being a leader in technology and innovation, it’s very important that as we take it to the next level, we lead with Cadillac,” GM CEO Mary Barra said.

After a 10-year boom, analysts expect North American motor sales to contract in 2019, as consumers face pressures and carmakers grapple with multiple uncertainties.

Rising interest rates and car prices have squeezed car buyers, and fewer of them are able to afford increasingly pricey, technology-heavy cars.

Kelley Blue Book predicted the average new-car price was up about 3% in 2018 to more than $36,000 (R497,000).

Meanwhile, tariffs on imported steel and aluminum products and a potentially intensifying trade dispute between the Donald Trump administration and Beijing has carmakers spooked.

“Tariffs already had an impact in 2018,” Cox Automotive chief analyst Jonathan Smoke said.

In total, 47% of the vehicles sold in the US in 2018 were imported.

“We believe about 2% of today’s prices are because of the tariffs that were already implemented.”

The US is considering additional tariffs of 25%. Should it announce such a move by the February 17 deadline, it could have a substantial impact on the industry and stock markets, Smoke said.

“They are likely to move forward with some form of that tariff, because it becomes then a lever for them to force further negotiations.”

Should tariffs raise car prices further, analysts said it could substantially depress the newcar market. Consumers would flock to relatively cheaper used cars – in ample supply.

The motor dealers’ association which organises the show was also contending with the uncertainty of its relevance.

Almost all German carmakers abandoned the show this year, as more and more important announcements are made at other gatherings.

In 2020, the Detroit show will move from January, when it has been held for about 40 years, to June.

The chair of the 2020 show, Doug North, said the aim was to provide a more interactive experience for the nearly one million attendees who came to Detroit for the event.

“Warmer weather, ride and drives, hill-climbs maybe, all sorts of exhibitions, dynamic opportunities for people to be in and out of the cars, ride in them, for the manufacturers to show what they couldn’t previously do inside,” North said.

Among the few notable unveilings this year will be from Ford, which will display a redesigned Explorer SUV and a more powerful version of its iconic Mustang sports car under the name Shelby GT500.

SUVs and trucks will once again be the highlight, indicative of US consumers’ drift away from sedans and small cars. Trucks and SUVs made up a majority of new purchases in the US in 2018.

“The SUVs have become cars with SUV bodies sitting on top of them,” Karl Brauer, of Kelly Blue Book, said.

Detroit’s big three carmakers have been ending production of almost all of their sedans and small cars, due to falling demand.

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