Reduced oil prices do not change the general car strategy

Reduced oil prices do not change the general car strategy

Since late June 2014, international oil prices have dropped sharply. On November 5, crude oil futures prices on the New York Mercantile Exchange fell to US$77.19/barrel, Brent crude oil futures price was US$82.95/barrel, and OPEC’s crude oil package was closed. At $78.11/barrel, the three prices all fell by nearly a quarter of their peaks in June.

There are many reasons for the continued decline in international oil prices, and the unconventional oil and gas revolution in the United States is the main reason for the continuous decline in the current round of oil prices. The United States has rapidly advanced the re-industrialization revolution, and the economy has come out of the trough. The quantitative easing monetary policy has stabilized the value of the US dollar. China's economy is attributable to the new normal, and the increase in oil imports cannot hedge against the reduced imports of the U.S. EU. The continuous and rapid growth of shale gas and various kinds of natural gas production has increased the pressure of replacing natural gas with natural gas. In order to safeguard their own interests, oil producing countries try to suppress the momentum of the new oil and gas technology revolution through price wars. However, it cannot rule out the United States’ strategic intention of suppressing Russia by depressing oil prices.

Chuck Stevens, chief financial officer of General Motors, said recently that while the recent drop in oil prices has prompted US consumers to be more inclined to buy large vehicles, the company will still improve and upgrade its lineup of small, fuel-efficient models. . At the same time, he stressed that vehicle electrification (from hybrid vehicles to pure electric vehicles) is still an extremely important strategic component of GM.

In recent months, the overall price of crude oil has fallen sharply. Demand for large-scale SUVs and pick-up trucks in the US market has been buoyant. Some of the largest full-size vehicles in the market have also experienced rapid sales growth. This is a boon for GM, which sells a large number of SUVs and pickup trucks in the United States. In the company's North American business profits, SUVs and pickups contributed a higher proportion.

However, Stevens still insists that GM will continue to increase its competitiveness in the small and medium-sized cars because these market segments are critical to GM's business outside the United States, and oil prices may still rebound. In its view, in the long run, oil prices will stabilize at a level of 100 US dollars/barrel or more, so GM is not prepared to change long-term planning.

In the United States, gasoline is less affected by taxes than other industrial countries and is more sensitive to fluctuations in crude oil prices. The price of crude oil dipped, and the retail price of gasoline in the US market fell more than most other countries. This also means that in other countries, after the decline in the price of crude oil in the auto market, the trend of shifting consumer trends toward large vehicles is not as pronounced as in the United States. Coupled with the relatively low proportion of large SUVs/pickups in markets outside the United States, GM still needs to focus on small and medium-sized car segments to ensure profitability in Asia and Europe.

Stevens pointed out that GM had overly relied on full-size SUVs and pickups, and the lessons were painful. In 2009, GM emerged from the bankruptcy in the shadow of bankruptcy. At the time, the price of oil rose and consumers turned from large cars to small cars. Stevens said: "Our goal is to improve the quality of income, expand the scope of coverage, reduce the dependence on full-size SUVs and pickups... We will improve and enhance the entire product lineup, from small cars to luxury cars." "We will We will rely on small cars and midsize cars to make profits in South America, Europe and Asia, and these will continue to be our strategic areas of focus."

For each car company, there are priorities and means for reducing fuel consumption and improving fuel economy. For example, Ford uses a lot of lightweight aluminum for the F150 pickup, which can reduce the weight of the vehicle by 13% and fuel consumption by 5% to 29%. However, General Motors has no intention of achieving Ford's popularity in the field of lightweight aluminum, but instead focuses on electrification. Future GM will adopt a variety of strategies to improve the fuel economy of its product lineup. Some vehicles use lightweight high-grade materials, some still use traditional steel materials, and improve powertrains to cope with tightening regulations. Electrification is still the focus of General Motors. The United States has introduced a new fuel economy standard for new CAFE companies. By 2025, the average fuel efficiency of new vehicles will need to be increased from 27.5 gallons/mile in 2012 to 54.5 gallons/mile, almost doubling the total fuel efficiency. For this reason, GM must develop hybrid and electric vehicles.

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