The Ad Age Automotive Special Report


Automakers Grapple With Market Glut of New Products

By Published on .

DETROIT ( -- Too many new vehicles, not enough buyers.

Experts have talked about overcapacity in the auto industry for years. But in 2004, carmakers are adding even

more to this product traffic jam. Asian transplants, including Nissan North America and Toyota Motor Sales USA, have just added production capacity at U.S. plants. South Korea's Hyundai is readying its first U.S. plant. Detroit's carmakers have been reluctant to trim production at their plants.

Competition in every area
The auto industry is facing hotter competition this year as virtually every player seems to want to compete in every area. Detroit is even battling to retain leadership in the full-size pickup market, which it always dominated. But Toyota and Nissan finally have serious contenders in the segment.

All the carmakers want to increase vehicle sales while trying to maintain decent profit margins. But some companies haven't done as well as others in the early months of 2004, traditionally the slowest selling period for the industry. Still, total sales in January and February rose slightly from the same months in 2003. Not all the automakers enjoyed increased sales -- a continuation of their nagging problems from 2003.

Detroit carmakers are finally reacting beyond crosstown rivals. General Motors Corp., Ford Motor Co. and DaimlerChrysler's Chrysler Group all have a slew of new models this year in a major offensive against the imports.

Buyers' market
It's still generally a buyers' market because the car companies are still reluctantly playing the incentives game, which they would like to see disappear.

The pain of squeezed profit margins isn't just being felt in Detroit. Several importers are battling back from big sales drops in the past year and must do it without new product, the industry's golden goose.

The big question is whether consumers will keep buying new vehicles even with the sluggish economy and lingering questions over the job market.

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