I'm reading Beating the Street by Peter Lynch. On page 284 there's a line:

Demand ought to be high, and the lower dollar and the problems in Japan will help the U.S. automakers win back a larger share of the market.

Why would the lower dollar help the US automakers win the market back?


1 Answer 1


It depends on just what is meant by "US automakers". Traditionally, that term means the "Big 3": General Motors, Ford, and Chrysler. However, many non-US automakers have factories in the US, building their cars for US sales and sometimes for export.

The theory is that a lower dollar would make cars - and indeed, all American-made goods - cheaper in terms of other currencies. But this assumes that the goods are of equal quality, and the problem is that American cars - defined as those designed & built by the "Big 3" automakers - are widely percieved as inferior, even by many Americans. Thus the broad penetration of foreign brands (often actually built in the US) in every market segment from economy* cars to luxury brands like Mercedes, BMW, & Land Rover.

So a lower dollar wouldn't have that much of an effect on American car sales. It could well increase sales of US-built foreign marques, if those companies have sufficient US production capacity to increase exports.

*Which are often re-badged versions of cars produced by foreign automakers.

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