Wednesday, September 26, 2007

For the American Car Buyer, It's Never Been Better

From today's Wall Street Journal:

"Over the decades that the Big Three have struggled with their American operations, foreign auto companies have rapidly established and expanded U.S. production through foreign direct investment.

Broaden the view even more, to all American consumers, who have benefited greatly from the global engagement of the U.S. auto industry. The easiest way to see this is to visit any parking lot. The tally this morning outside my office? Five Big Three vehicles and 10 foreign-company vehicles. At the national level, in 1980 the Big Three had 73% of the U.S. automobile market. In recent months this share has slipped below half.

Thanks to all the competition among the Big Three and foreign companies, consumers have enjoyed massive innovation, new variety -- and lower prices. From 1990 through 2006, the overall U.S. consumer price index rose 53%. The rise in the autos CPI component? Just 13.4% (see chart above)."

MP: We hear a lot of bad news for U.S. automakers, especially in Michigan, e.g. about the decline of the Big Three's market share, the huge losses suffered by GM and Ford, the decline in UAW membership, the $90 billion in health-care benefits the Big Three owe to hundreds of thousands of union retirees, etc.

What we don't hear as much about though is the good, great, and even spectacular automotive news for U.S car buyers. Consider that the CPI for new cars is the same in August 2007 (about 160) as it was in 1994 (see chart above). In other words, new car prices have been flat for 13 years, are lower today than 10 years ago, and are only 12% higher than in 1990.

American car buyers have never had it better in terms of price, quality and selection. Globalization and competition have produced a true car buyer's heaven. It might be getting worse and worse for GM and the UAW, but it's getting better all the time for the group that really counts: the U.S. CONSUMER.


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