Crisis year 2009: only expensive fuel would help the auto industry

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Only expensive fuel would help the auto industry

Crisis year 2009: only expensive fuel would help the auto industry-crisis

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Source: AP

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Source: Chevrolet

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Source: AP

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Source: Honda

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Source: Toyota

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Source: DDP

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Source: Nissan

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Source: REUTERS

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Source: AFP

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Source: Honda CR-V

Lower sales, short-time work, production stoppage: the last quarter of 2008 in particular was a disaster for car manufacturers. And the outlook for 2009 is also rather bleak. Because the industry is in a double dilemma from which it will hardly be able to free itself on its own.

A.The Detroit Auto Show opens on Sunday, so far the sign of the dawn of the new auto year in the USA. This year, however, Detroit will be a sad thing. Auto production in North America slumped by 2.5 million vehicles to just under 13 million last year. In 2009 further cuts threaten.

But the chance of the crisis lies in the new, fuel-saving car models. Small cars like the Ford Fiesta will soon be rolling off the assembly line in the USA, and new hybrid vehicles from Toyota, Honda, but also from BMW and Mercedes will be in the exhibition halls.

New engines, such as a 1.6-liter diesel engine in Volvo’s new mid-range S60, which runs on five liters of fuel per 100 kilometers, were developed to bring about a turnaround in the automotive markets. And all the new models are in Detroit, of all places, where there was previously no place next to the fuel guzzlers. But the high investments made by automakers in smaller, fuel-efficient vehicles in the USA are paying off?

The gallon of gasoline (regular) in the US now costs less than $ 1.80 or the equivalent of $ 0.47 per liter. That is 0.37 euros. That is the carmaker’s dilemma. Substantial investments have been made in alternatives to the gas guzzlers, and in the middle of it consumers are spoiled with a low gasoline price.

That is a big brake on sales. Hardly anyone uses fuel savers at such prices. However, since the customer today does not know how long the gasoline price will remain so low, he does not invest in a new gas guzzler. What remains is to simply continue to drive the previous big car. The used car prices are in the basement anyway.

The leasing companies are also trying to simply extend the customers’ contracts with the current vehicle.

In this way, they reduce their residual value losses – also at the expense of new vehicle sales.

So here, too, little joy that arises in Detroit.

So at this year‘s auto show, there is a twofold dilemma. The major production cuts hang like a sword of Damocles over the exhibition halls.

At the same time, fuel-efficient vehicles are faced with a twofold handicap: consumers’ fear of recession and the low gasoline price.

The world’s most important car market will therefore continue to collapse this year. According to our forecasts, sales will drop by a million vehicles to 12.3 million.

The author is Professor of A-Business Administration and Automotive Economics at the University of Duisburg-Essen.

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