Carmakers Shift Bets to America, the Last Market Still Yielding Strong Profits

what happened

According to WSJ, the United States is becoming the last market where global carmakers can still earn high profits. Volkswagen is considering building its first American pickup in 40 years, Nissan promises tougher SUVs, and Detroit is working to protect its high margins. The draw is strong demand for large pickups and SUVs, and buyers' willingness to pay record sticker prices, with new cars hovering around $50,000.

Toyota is spending $3.6 billion on a factory to bring Tacoma pickup production back to the US, Audi announced a $4 billion plant in Georgia, and Hyundai aims to launch dozens of new or updated models in North America by the end of the decade. Analyst Sam Fiorani estimates new factories will add capacity for more than one million extra vehicles a year in the US by 2030, which could leave plants underused if demand softens.

why it matters

China's sales fell more than 20% through September, and Europe, Japan and the Middle East are also sluggish, which is why the US now matters so much to automakers. For investors the risk is overcapacity: the average car on US roads is about 13 years old, and idle factories could become costly if demand weakens further.

market impact

Automakers and their shares: US focus supports profitability, but new capacity raises the risk of oversupply.

instruments