As Detroit falters, Asian makers pick up speed

Roland Jones Business news editor • Profile • E-mail

In October 1957, a chrome-finished and tail-finned Toyopet Crown made its debut in a small Southern California dealership. The unremarkable four-door sedan — the first on the U.S. automotive market from a Japanese car maker called Toyota — was at the cutting edge of automotive styling, but only 287 were sold in its first full year in America.

Today, almost 50 years since its North American debut, that same plucky car company is poised to overtake its American rivals, surpassing General Motors as the world’s No. 1 automobile maker by producing an estimated 9.06 million vehicles in 2006 and surpassing GM’s expected output.

As America’s Big Three automakers struggle, Asia is emerging as the dominant force in the international car market, tapping into consumers’ desires for fuel-efficient cars and picking up many of the sales lost by their shrinking American rivals. U.S. giants Ford and Chrysler are downsizing as consumer demand shifts away from gas-guzzling SUVs and they struggle with crippling worker health care and pension liabilities.

By contrast, Asian car companies are thriving. Toyota’s U.S. annual sales have swelled to about 15 percent of the market. Its Camry is the best-selling U.S. passenger car, its Lexus brand is the top-selling U.S. luxury car and, at a time of high gasoline prices, its gas-electric Prius is the most popular hybrid vehicle in America.

Toyota and its Japanese cousin Honda have been at the vanguard of new consumer demand for fuel-efficient cars — just the sort of cars U.S. consumers are craving, as gasoline prices edge worryingly toward $3 a gallon.

In fact, Toyota crept into third place in terms of U.S. auto sales last month for the first time, outselling DaimlerChrysler and helping Asian brands (mainly Japanese and South Korean) to capture a larger share of the U.S. light vehicle market. At the same time, the combined market share of the largest U.S. automakers — GM and Ford — continued to shrink.

“It’s basically a foregone conclusion that Toyota will trump GM within the next few years and capture the title of world’s No. 1 automaker,” said Phil Lienert, associate editor Edmunds.com, an Internet-based resource for consumer automotive information.

“[Toyota’s] business works more efficiently, and it’s giving consumers if not a better quality of car then the illusion of better quality, because GM and Ford’s cars are much better-built than in the past, but they can’t shake the [perception] of Asia’s superiority,” Lienert said.

It’s not just Japan’s automakers taking the U.S. car market by storm. Kia and Hyundai from South Korea also have made significant gains, with Hyundai enjoying record sales of the Sonata sedan it builds at its plant in Montgomery, Ala. The Sonata also scored high marks on the National Highway Traffic Safety Administration’s crash and rollover tests.

“That’s key,” notes Lienert. “It illustrates the remarkable strides these carmakers have made, and I think you’ll see Hyundai will rob some market share from Toyota. And Kia has gone from being a budget carmaker to one with quality that’s close to Toyota.”

Asia’s increasing dominance in the worldwide automotive industry will see firms like Honda, Nissan, Toyota and Hyundai make decisions that impact the rest of the industry, notes Michael Robinet, an automotive analyst with the consulting firm CSM Worldwide. The drift is part of what he calls the “Asian-ification” of the automotive industry.

“Asian companies will be the ones leading the expansion into new countries — that will have an impact on production and distribution,” he said. “And increasingly, a greater part of a vehicle will be built in Asia — that’s a shift suppliers will have to deal with. There are a number of possibilities here, and we may see some mergers, but the industry as we look at it today may have some blockbuster Asian alliance, and we’ll have to deal with what comes from China and India, and also from Thailand and Malaysia.”

The Asian player most feared by Detroit has yet to make its debut in the United States, but its low-cost cars are on the horizon.

Until recently, Chinese vehicle exports were limited to buses and trucks, but Chinese manufacturers have been busy upgrading technology and production to compete overseas. At the 2006 North American International Auto Show in Detroit earlier this year, Chinese automaker Geely Motors unveiled a car that it plans to sell in the U.S. market in the summer or fall of 2008. The silver sedan will be very competitively priced when it goes on sale — below the $10,000 level, according to news reports.

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