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Total light vehicle sales in the US were robust in the latter months of 2011, outperforming the largely underwhelming economic data coming from other sectors. Indeed, one notable outcome in H211 was that in the overall retail sector, private consumption appeared to be detached from general sentiment data. This was prevalent in vehicle sales, which ended the first 11 months of 2011 up 10.4% y-o-y. The total was bolstered by the light truck market, which registered growth of 11.8% compared with 9.0% for the passenger car segment.

Low interest rates have made for favourable lending conditions for both individuals and businesses and this has been reflected in an uptick in autos loans in 2011. More importantly for the sustainability of this growth, auto loan delinquency is falling. According to credit data firm TransUnion, loan delinquencies fell for the eighth straight quarter in Q311 and the company expects this to continue into H112.

We also expect favourable credit conditions to carry over into the early part of 2012 with little movement on rates expected. Indeed, there is a more positive outlook for the US in general, as our economic growth forecast has also been revised upwards from 1.6% to 2.0%, as a result of the positive base effects of H211. With this brighter economic picture in mind, coupled with stronger than expected consumer appetite and accessible credit, we have also raised our light vehicle sales forecast for 2012, with total sales of 13.278 mn units now looking achievable.

In terms of trade relationships, BMI believes Chinas move to impose tariffs on certain US vehicles is largely a gesture and will not seriously affect US exports to the country, given the relatively low volumes involved. Duties will be imposed on vehicles with engines of 2.5-litres or above, signalling the governments intent to protect its own domestic industry as it tries to move into the premium market.

Although Andrea Mead of the US Trade Representative says the tariffs violate multiple WTO rules, the actual impact on carmakers is likely to be limited by their increased production operations in China.

On a more positive note for trade, the long-awaited ratification of the Korea-US (KORUS) free trade agreement (FTA) will undoubtedly bring benefits for US carmakers, who have bemoaned a trade imbalance between the two countries in the autos sector. They now have greater access to South Koreas thriving vehicle import market, but more importantly, have secured protection from massive gains by their Korean counterparts through some of the renegotiated clauses of the agreement.