China’s central bank announced that it would let its currency trade in a wider range, triggering a rise in its value on Monday. This move could affect U.S. automakers in important ways.
GM, Ford and Chrysler could all stand to benefit as their popular brands become more affordable in a China with stronger currency. China obviously has an enormous, growing market, and the U.S. government has long been after the Chinese to let their currency rise commensurate with the country’s economic growth. This would boost demand for imported goods, especially luxury items.
Ford and GM would benefit the most because they have car-manufacturing ventures already underway in China. By releasing its stranglehold on the artificially weakened yuan, China will probably boost those automakers’ sales and lessen Detroit’s fears that China is about to flood the U.S. market with cheap car imports.
The flip side is the cost of manufacturing could rise. Both U.S. automakers and their suppliers import a lot of Chinese components made cheap by the weak yuan — $5.6 billion worth to be precise.
