The two best car markets in the world right now are the US and China.
You might think this would be awesome for the Chinese, and you’d be right.
But to a large degree, the Chinese auto market is an extension of the US market, given that many US, European, and Japanese car makers — everyone who sells cars in America — do business in the Middle Kingdom.
The US market is the world’s most competitive. The Chinese market is the world’s largest and fastest-growing. But they have one critical thing in common: Americans and Chinese both love SUVs.
And that’s great for the automakers that have SUVs, especially full-size SUVs, to sell. As General Motors CFO Chuck Stevens pointed out on the company’s first-quarter earnings call on Thursday, in China GM can make $US1,000-$US1,500 per vehicle on full-size SUVs. This is better than on anything else the company makes.
The entire global auto market is really primed right now to reward companies that have big SUVs in their lineups. Gas is relatively cheaper than it has been in recent years, interest rates are low (giving consumers the confidence to borrow more to buy bigger vehicles), and traditional America car makers — GM, Ford, and Chrysler — have as customers the kind of folks who need large vehicles: families.
Other car makers are selling lots of SUVs, too. Audi SUV sales in both China and the US are great. Likewise BMW and Mercedes.
Increasingly, the Chinese car buyer looks more like the American car buyer than the European customer. Europeans like small cars and compact SUVs. They just can’t afford to spend a lot on gas, which is considerably more expensive in Europe. Plus, a decent chunk of the European market likes performance cars. And SUVs are not performance cars.
The bottom line is that if you’re building cars and you want to compete in the world’s two best markets, you need to build SUVs.
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