Automakers’ “Global DNA”

This post was written by James Coan, Research Associate at the Baker Institute Energy Forum.

Imagine two car companies. One sold almost three-quarters of its vehicles outside the U.S. Another built 90 percent of its autos sold in the U.S. in America.

What are the names of these companies? It may be surprising, but the one that sold over 73% of its vehicles outside the U.S. is GM, while Honda built almost all of its U.S. vehicles in the first half of 2010 in the U.S.

In 2010, GM’s U.S. sales were 2.2 million, while its worldwide sales were 8.39 million. GM sold more vehicles in China than it did in the U.S. last year!

Another “domestic” automaker, Ford, also sells the majority of its vehicles abroad, while the top “import” brands build the majority of their light-duty vehicles sold in the U.S. right here. In 2010, Ford sold 64% of its vehicles abroad,* and in a relatively average month (May 2010), 69% and 70% of Toyota’s and Nissan’s U.S. sales, respectively, were built domestically.

According to a cars.com analysis from the first half of 2009, Honda also has roughly the same domestic content in its U.S. vehicles (58%) as the automakers headquartered in the U.S. (60-69%).

This increasingly global auto market makes such distinctions between “domestic” and “import” brands less and less relevant, with important policy implications that support stronger fuel economy standards in the U.S.

Countries outside the U.S. generally have stricter fuel economy standards and targets than current policy in the U.S. Automakers generally benefit if they can make similar vehicles around the world rather than niche products for individual markets. Ford, for instance, is embracing this concept of creating similar vehicles around the world, calling it “Ford Global DNA.” If the U.S. raises its standards to levels abroad, automakers can sell fewer models globally and cut costs.

Similarly, auto companies based both here and abroad support many American jobs. It makes little sense to weaken fuel economy standards just to try to protect GM, Ford and Chrysler jobs – especially when the companies clearly need to compete abroad as well. The most discussed proposal for standards out to 2025 contains a separate light truck standard, which accounts for the greater reliance of these companies on light truck sales.

As time goes on and sales outside the U.S. continue to grow, automakers will have even more “global DNA,” and the distinctions between Detroit and automakers based abroad will likely blur further. Similar fuel economy standards around the world should benefit these global companies.

*Ford sold 5.31 million vehicles worldwide, of which 1.935 million were sold in the U.S. in 2010.

4 Comments

  1. Gnu

    So how much of Honda’s total output, or even just the autos made in Japan, are sold in the homeland? Honda is a major exporter, why not GM or Ford?

    #1
  2. Gnu,

    Great questions.

    As for your first question, see this link: http://world.honda.com/news/2011/c110127Sales-Production-Result/

    Japan accounted for only about 650,000 vehicles of the 3.56 million Honda sold worldwide. Then again, Honda only produced 992,000 vehicles in Japan in 2010 and produced the rest abroad.

    Question 2: I think the following article from the Wall Street Journal from 2008 helps answer your question about exports from the U.S.: http://online.wsj.com/article/SB120761191252596525.html

    It indicates that historically high labor costs and a strong dollar have combined to minimize vehicle exports from the U.S., though there has been some.

    James

    #2
  3. rts

    What this article shows, is how dimly aware the American public is about what is going on in the rest of the world. With GM and Ford selling more cars in China than the US it shows that in time, the American market will not play a major role in their corporate thinking. It also shows why the US will soon be the worlds second largest economy and why our economic growth will permanently be low. Ours is a replacement economy…we buy to replace, not because we need more of things. In China their population is 4 times the size of ours. They are buying because they don’t have things…first they want to have a car. Then they want to be a two car family. Here, everyone in the family has a car and a new or newer one is only bought when one wears out.

    #3
  4. SouthernOutlaw

    It’s called globalization. And in a few years we’ll be going to a one-world currency and living under the laws of the United Nations.

    #4