Domestic Trends
The U.S. market for cars and light trucks declined slightly for the second year in a row to almost 16.1 million vehicles in 2007, but overall sales remained strong, marking the ninth consecutive year with sales above 16 million units.

Although light trucks still accounted for over half of the U.S. passenger vehicle market in 2007, sales declined for the third straight year. Sales of passenger cars also declined after increasing for the previous two years. Cross utility vehicles’ sales increased, but sales in every other light truck segment (sport utility vehicles, pickup trucks and vans) decreased. Sales of hybrid vehicles increased significantly, up 40 percent, to reach 350,000 vehicles. This hybrid trend is likely to continue as more manufacturers introduce new hybrid and alternative fuel products in the coming months and years.

With increased competition, the combined market share of the Detroit 3 (GM, Ford and Chrysler) continued to fall, decreasing from 71.3 percent in 1997 to 50.9 percent in 2007. The loss of North American profitability and the need to control legacy costs led GM and Ford to announce massive restructuring plans in late 2005 and during 2006. After being sold by Daimler, Chrysler also announced restructuring plans in February 2007.

Meanwhile, foreign competitors continue to invest in U.S. auto assembly plants and their individual, as well as cumulative U.S. market share continues to grow. Japanese brands had a 37.2 percent market share, and German brands had 5.9 percent in 2007. The Korean manufacturers, in particular, continue to make inroads in the U.S. marketplace with their market share growing from 2 percent in 2000 to 4.8 percent in 2007.

International Trends
The U.S. light vehicle trade deficit remained the highest in the world; however, it decreased in 2007 by 10.4 percent to almost $97 billion (this is related to the dollar’s decline in the global currency market). U.S. light vehicle exports increased 26.1 percent in 2007 to reach $50.7 billion, and imports decreased 0.5 percent to $147.6 billion, with a substantial portion of U.S. auto trade being intra-NAFTA. During 2007, imports from Japan remained flat, increasing by 0.5 percent, imports from Korea decreased by 5 percent, and imports from Germany decreased by 8 percent.

Capacity
U.S. light vehicle manufacturing capacity has slightly increased over the last decade, up from 12.91 million units in 1996 to 12.95 million units in 2006. In 2006, the Harbour Report showed that average capacity utilization was 83.9 percent. However, there are large differences among individual plants. Reductions in the Detroit 3’s production will only be partially offset by new investments from foreign-affiliated firms.

Outlook
Market analysts are forecasting U.S. vehicle sales and overall production volumes in 2008 to be lower than in 2007, citing record oil prices, a housing slump, and consumers’ decreased confidence in the economy. GM, Ford, and Chrysler will continue to implement their restructuring plans and battle for market share. In addition, the industry faces a growing consumer interest in fuel-efficient vehicles, stricter fuel economy regulations, and increased North American production from the Japanese, German, and Korean automakers

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Manufacturing & Services
Office of Aerospace and Automotive Industries
U.S. Department of Commerce
http://www.trade.gov

INTRODUCTION
Despite the ninth straight year of sales levels above 16 million vehicles, it was another difficult year for some of the individual automakers, particularly the Detroit 3.

The domestic automakers continued to restructure their North American operations in order to meet challenges such as U.S. market share loss to foreign competitors, and high legacy and commodity costs. During the fall of 2007, labor negotiations were held between each of the Detroit 3 and the UAW. The resulting landmark contracts, which will reduce the Detroit 3’s workforce, wages, and healthcare costs, will improve the automakers’ competitiveness and save the companies approximately $1,000 per vehicle.

In 2007, U.S. light vehicle sales totaled 16.1 million units, down 2.4 percent compared to 16.5 million units in 2006. Although light trucks still accounted for 52.6 percent of the U.S. light passenger vehicle market in 2007, sales fell to 8.5 million units, a decrease of 2.4 percent from 2006. While cross utility vehicles’ sales increased 8.4 percent, pickup trucks’ sales fell 6.2 percent. Sales of passenger cars also decreased 2.6 percent last year, with an 18.1 percent decrease in sales of large cars.

According to the Department of Commerce’s Bureau of Economic Analysis (BEA), consumer expenditures on new vehicles have been in flux over the past several years. (Chart 1) After consecutive decreases during 2004-2006, spending on new trucks increased 4.9 percent last year to $140.7 billion. Conversely, expenditures on new cars decreased 3.8 percent to $103.0 billion during 2007 after consecutive increases during 2003-2006. (Table 1)

U.S. light vehicle production also declined in 2007, falling by 3 percent to a total of 10.5 million units. (Table 2) Sales of vehicles produced outside the NAFTA region continued to rise in 2007, and their share of the market grew to 23.3 percent of total sales, an increase of 1.9 percent in sales. The share of U.S. sales of vehicles produced in Japan reached 13.6 percent of the U.S. market in 2007, an increase of 4.2 percent in sales; the share of imported German vehicles sold in the United States grew slightly to 3.8 percent of the market, a 2.3 percent increase in sales; and, the share of imported Korean vehicles fell to 4 percent of the market, a decrease of 3 percent in sales. ...

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