US small-car production may outstrip demand
- Source: Global Times
- [15:48 August 31 2009]
- Comments
General Motors Co., Ford Motor Co. and Chrysler Group LLC, primed by government incentives to make fuel-efficient models, plan a 63 percent boost in small-car production capacity by 2015 that may outstrip demand.
The US automakers will be able to assemble 2.71 million small cars annually in North America in six years, rising from 1.66 million now, according to consulting firm CSM Worldwide in Northville, Michigan. Industrywide capacity for the segment will rise to 7.5 million vehicles from 4 million, CSM estimated.
Consumers may not be ready for that many small autos. Based on projections for small-car purchases from consultant IHS Global Insight, US auto sales by 2015 would have to surge to almost twice the current annual record to absorb all of the possible new output.
"Unless the government is doing something we don't know about to raise the price of gasoline, we don't think there's going to be a lot of demand for small cars," said John Wolkonowicz, a Global Insight analyst in Lexington, Massachusetts.
The small-car push is being driven in part by the US requirement that auto fuel efficiency rise about 40 percent to an average of 35 miles per gallon by 2016. Small-car sales climbed to 18.1 percent of the US market last year from 15 percent in 2007, as gasoline prices surged to record highs.
Automakers also are tapping sources such as the Energy Department's $25 billion loan program to develop more fuel- efficient vehicles.
