The uncertainty surrounding the U.S. housing market has added an element of risk to the outlook for U.S. auto sales next year, BMW AG's senior executive for North America said Wednesday.
Tom Purves, the chief executive of BMW USA, said it was not clear whether the downturn in U.S. residential real estate was a short-term correction after sharp recent gains or the start of a more prolonged slump.
"The jury is out on that as far as I can see," he told Reuters on the sidelines of the Los Angeles Auto Show.
Purves said that while BMW was on track to post record U.S. sales in 2006, the broader luxury car market could be hurt in the months ahead by a weaker property market.
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"I think it's absolutely natural that people should consider that a possibility because historically the luxury car market has tracked house prices more than it has the stock market," he said.
BMW's overall sales were up about 1 percent in the first 10 months of the year. Industry-wide sales of cars and light trucks were down almost 3 percent over the same period.
"These are very good results and don't indicate a weakness in the economy but the reality of it is when you see house prices adjust, cautious people are wise to take pause," he said.
He added: "We said we should end this year with a record year. We anticipate that next year we should go forward again, so long as the economy is reasonably strong. If there is an economic turn down, clearly what you try to do is to maintain your segment share because it's strategically important."
Purves said the weaker U.S. dollar against the euro was a concern, even though BMW has been able to hedge some of its exposure against such currency fluctuation with its plant in Spartanburg, South Carolina.
"There is no doubt that with the dollar at the levels that its at it's a concern for everybody," he said.
BMW used the Los Angeles Auto Show to show off its Hydrogen 7, a version of its upscale 7-series sedan equipped to run on either hydrogen or gasoline.
BMW plans to build 100 of the 12-cylinder Hydrogen 7 performance sedans. Purves said about 25 would be allocated for leases to high-profile drivers in the United States, partly as an attempt to lobby for development of a hydrogen refueling infrastructure.
"By having them out on in the marketplace running on the public road, we'll get feedback on how they operate and at the same time we'll spread the word about the fact that you can use an internal combustion engine and run totally clean fuel through it," he said.
Copyright Reuters 2006.
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