Imports Should Gain Steady Ground

Look for importers to hold their U.S. market-share ground over the next five years — thanks to the Big Three.

Asian and European auto makers have been chipping away domestic market share the past two decades, but it will be U.S.-owned foreign brands such as Saab, Jaguar, Volvo and Land Rover that will do much of the import-related damage between now and 2007.

Off-shore manufacturers, once relegated to competing in narrow segments, have expanded their products and North American capacity. At the same time, imports have been increasing steadily, rising to more than 19% of the market, after bottoming out at 11.3% in 1996.

Imports will continue to increase penetration for the next two years, reaching 20.7% in 2004 before returning to near current levels three years later, based on a forecast by Global Insight Inc. (formerly DRI-WEFA).

The fallback primarily will come as Asian car makers expand manufacturing in North America. Import share will stabilize later in the decade — evening out at 19.8% — led by imports from Western Europe.

Ironically, increased sales of the Big Three import brands will be a strong part of the engine that spurs the rise in European-sourced vehicles, along with growth by BMW AG and Volkswagen AG imports.

The Big Three's share of import sales will increase from 18% forecast for 2002 to 24.3% in 2007, says Global Insight. Independent European auto makers' combined share will grow from 13.5% to 18.3%. Asians will continue as import leaders, but their share of import sales will decline from 68.5% this year to 57.4% in '07.

The Big Three increases mostly are at Ford Motor Co. and DaimlerChrysler Corp. Imports will rise from 10% of Ford's U.S. sales in 2002 to 12.9% in 2007, while they'll hit 10.5% of DC's mix, up from about 6.7% today. General Motors Corp.'s import sales also will rise, but to just 1.8% of the auto maker's total deliveries.

The thrust of the Big Three imports will come from Europe. They will be made up of brands acquired by Ford and GM since 1989, and by DC's Mercedes-Benz unit. Why isn't the Big Three moving more production to over-capacitized North America?

“Their capacity is underutilized in the rest of the world, too,” says Rebecca Lindland, Global Insight senior market analyst. “As they expand their product lines, they're going to use their European facilities. It's a lot easier and less expensive to build those vehicles in overseas plants they have already.”

DC is increasing capacity of Mercedes vehicles at its Alabama plant, but Global Insight forecasts a 60% increase in U.S. sales of the auto maker's European-made vehicles over the next five years.

It won't be just the Big Three's foreign brands that aid imports. GM next year will source the Pontiac GTO from Australia and DC's Chrysler Crossfire will be built in Germany. The Ford Fusion small cross/utility vehicle comes to the U.S. in 2004 from Brazil.