US sales buoy German car makers

IT WAS only a few years ago that some economists were arguing that Europe was "decoupling" from its long dependence on trade with the US, and predicting that the Continent's future lay with the so-called tiger economies of Asia.

IT WAS only a few years ago that some economists were arguing that Europe was "decoupling" from its long dependence on trade with the US, and predicting that the Continent's future lay with the so-called tiger economies of Asia.

German car makers, at least, had a different vision of the future.

The recovery in the US car market, which produced big earnings growth at Chrysler and Ford in their fourth quarters, has also been a boon for Germany's Big Three - Daimler, BMW and Volkswagen.

Double-digit increases in US sales last year reflected an overall rise in demand by American buyers for European and, above all, German products. Well-designed vehicles and machinery, a Germany specialty, were by far the biggest categories of European exports to the US.

As a result, overall German exports to the US rose 24 per cent in October from a year earlier, outpacing the 18 per cent growth for eurozone exports to the US.

In many ways, the success of the German car makers has let them invest to produce further success when it comes to the US market. The German companies are cashing in on years of commitment to the US, which remained an important market for them even as the global car industry trained its sights on China.

Volkswagen, for example, has invested $US4 billion in the US since 2008, building a factory in Chattanooga that began churning out Passat sedans in 2011.

"Five years ago, we reset the clock here in America," said Martin Winterkorn, the chief executive of Volkswagen. "The Passat was made in America for America."

Nearly a third of the vehicles that BMW sells in the US are built in the US, according to LMC Automotive, a research firm. Mercedes and VW produce about a quarter of what they sell in the US in local factories.

BMW and Mercedes have also expanded their appeal by moving carefully into more affordable parts of the market. Mercedes, for example, sells an entry-level sedan for less than $US30,000 ($28,8000).

All of that has contributed to a sales surge. BMW sales in the US rose 14 per cent last year, including the Mini brand; sales of Daimler's Mercedes and Smart brands rose more than 15 per cent; and Volkswagen's sales rose 34 per cent, including the Audi brand. For Mercedes and VW, those were better growth rates than in China, and helped to offset slower sales there.

The German car makers' strong results contrast with those of European rivals such as Renault and PSA Peugeot Citroen, which abandoned the US market decades ago. Now the French car makers are short of ways to counterbalance the stricken European market.

The renaissance of US demand is a big shift from a few years ago when all the action seemed to be in Asia. The realignment has prompted some companies and governments to re-examine their priorities, and helps explain why EU leaders such as Germany's Angela Merkel and Britain's David Cameron have been pushing hard for a new European-US trade agreement. A deal would eliminate tariffs and harmonise regulatory requirements for cars and other products.

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