Interpreting Recent Trends in the US Auto Industry

Interpreting Recent Trends in the US Auto Industry. Economics & Statistics Administration, U.S. Department of Commerce. Web posted July 18, 2013.

U.S. light vehicle demand has recovered to near pre-recession levels; in fact, June’s seasonally adjusted annual sales rate of almost 16 million vehicles was the highest since 2007. Assembly of light vehicles in the U.S. has also returned to near pre-recession levels. These figures show a remarkable turnaround from just four years ago, when the industry’s major domestically owned firms were bankrupt. The U.S. auto industry has fundamental strengths in demand, quality, and innovation. However, other nations are not standing still, leading to a growing U.S. trade deficit in autos. In particular, Mexico accounts for 26% of the U.S. trade deficit in passenger vehicles and parts (33% if heavy trucks are included). Germany accounts for another 16% of our auto trade deficit, despite significantly higher wages than in the U.S.. Both of these nations could be partners as well as rivals. In particular, having Mexico and the U.S. each specialize in what it does best could mean more total U.S. employment in the industry, by making the overall North American industry more competitive. Policy could play a role in avoiding a race to the bottom, and instead promote growth that leads to higher wages and more innovation on both sides of the border.

[PDF format, 8 pages, 242.08 KB].

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