US carmakers take two routes to Detroit motor show

As United States carmakers confirmed 2015 as their best year for sales last week, few of their top executives were in the industry's Detroit hub to celebrate. Many were 2,000 miles away in Las Vegas for the Consumer Electronics Show (CES).

Yet distance was not the only thing that separated the two events. The executives in Las Vegas were largely there to promote cutting-edge technologies such as driverless cars. Back in Motor City the welcome sales figures were led by a surge, encouraged by low fuel prices, in the market for traditional pick-up trucks and sports utility vehicles.

That disconnect is likely to be on view at the US car industry's biggest annual event, North American International Auto Show in Detroit, which opens today. During it, carmakers will unveil the latest in sophisticated electric and hybrid vehicles and also showcase dozens of big, relatively fuel-hungry vehicles.

The split highlights the competing pressures on carmakers from regulators – which have set strict fuel-economy rules – and customers, according to Mark Wakefield, head of automotive for consultancy AlixPartners.

“While [petrol] prices were high, the motivation of the regulators was lined up with the motivation of the buying public. Now that gas prices are so low, those technologies that are going to be required [to improve fuel economy] don’t show a payback,” he said.

Matt DeLorenzo, managing editor of Kelley Blue Book, the car information service, said many of the product launches will be of workaday vehicles very different from the CES concepts: "You will see a lot of vehicles that are popular and make the profits to help pay for these alternative-fuel vehicles."

He said carmakers want to maintain momentum after the record 17.5 million vehicle sales in the US last year: “They hope to keep the ball rolling. Part of that is new product.”

However, it remains vital for carmakers that they launch more efficient models to meet fuel economy rules. The regulations, introduced in 2012, demand that they nearly double average fuel economy, to 54.5 miles per US gallon (45mpg imperial), by the time 2025 model year vehicles go on sale.

The big carmakers also want to showcase their innovative vehicles to head off the growing challenge from tech companies such as Google.

“I think that the carmakers are very cognisant of the desires of the Apples and Googles of the world to get into their business,” Mr DeLorenzo said. “They will either partner with them or at least won’t let them steal a march on their car business.”

Most of the new vehicles on show will be aimed at boosting profits. SUVs and pick-up trucks are far more profitable than conventional saloons.

This also lies behind a surge in luxury vehicles set to unveiled at the event. For European buyers all eyes will be on the unveiling of the new Mercedes-Benz E-Class.

Mainstream brands are also trying to push into the premium market, and the rush into the high- end cars has raised concerns that the market may be reaching saturation point.

“It’s coming to a point where there are maybe too many cars chasing too few buyers,” said Mr DeLorenzo. – (Copyright The Financial Times Limited)