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Tuesday, June 28, 2011

Missed Opportunities for US Carmakers in China

As 2011 moves forward, it is turning out to be an extraordinary year for German auto manufacturers. Mercedes, BMW and Audi are experiencing record profits in the US. In China, Mercedes is about to sell more cars there than they do in Germany or the US. Are Ford, GM and other US car brands fully engaged in China’s automobile market? On the surface, it would seem they are, especially because GM just sold more vehicles in China than in the US. 

However, while GM is growing at 45% in China and 15% in the US, Mercedes is doubling sales in China and experiencing record profits1. Chinese consumers are hungry for high quality luxury items. As their wealth grows as a nation, it appears they are seeking to enjoy the fruits of their labor by purchasing the best. Still, as the market for luxury cars grows, American automakers lack products to compete.

Is there a reason US cars have sunk to the lower end of the demographic scale? There was a time when the US was synonymous with high quality. Now the highest priced GM vehicle is approximately the same cost for the lowest priced Mercedes. By not making high-end luxury cars, the US has given up the title of high quality without a fight when it comes to automobiles.

Think about it. How often do you hear someone say: I am trying to decide if I want the Cadillac or the Bentley? When you want the best car for your money and you can afford what you want, you buy German.

Most recently, the excuse has been that the affluent market was not large enough. With record profits by German luxury automakers and consistent, rapid growth globally, what more does the US need to know that they are missing the boat? Earlier this year I wrote an article on my blog and outlined the need for a luxury US automaker and why Chrysler should fill it. What do you think? I welcome your responses. 

In time, I assert, China will replicate Germany’s efforts to produce luxury cars. If you need proof, look at Japan’s Lexus and Infinity. When China joins the global competition for cars, especially luxury cars, it may be a matter of time before China bails out the US car makers. Maybe that will be the badly needed wake up call for the US to do things much differently. 

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