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Power Lunch

Why China is the growth engine for the U.S. auto industry

An assembly worker works on Ford Mustangs at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan.
Rebecca Cook | Reuters

The U.S. auto market remains a bright spot in the global automobile market as China's economy cools.

Sales figures released Tuesday show U.S. automakers gained strength in August, shaking off turbulent stock markets to stay on track for the industry's best annual sales since 2001 at 17 million this year.

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General Motors, the largest U.S. automaker posted a drop of 0.7 percent in sales, better than analysts' estimates.

Ford Motor, the second largest U.S. automaker by vehicle sales, jumped five percent, handily beating expectations as sales of its new F-150 pickup gained steam

Bob Lutz, former General Motors vice chairman, told CNBC's "Power Lunch" Tuesday why he believes American consumers continue to trade up to bigger, newer vehicles.

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"The consumer is not being squeezed, and in fact with gas prices in the U.S. going down to two dollars a gallon or even lower fairly soon, there is absolutely no incentive for the consumer to buy anything smaller."

"It's going to hurt for a while," said Lutz. "It is simply a pause in growth, but I don't' its anything to be worried about at this point."

Lutz, who has 47 years experience in the global automotive market, including leadership posts at BMW, Ford and Chrysler, believes Chinese demand is unstoppable.

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"Car companies and dealerships are rapidly expanding into China's interior, not contracting. If the estimate of Chinese auto sales hitting 30 million vehicles by 2020 is reached, China's automotive market will outpace Europe and North America combined. I think that's definitely going to happen."

In the second quarter of 2015, GM's income from Chinese joint ventures topped $500 million and the country remains GM's biggest market.

GM is on track to sell five million vehicles in China annually by 2018, up from 3.5 million last year, with plans to spend $14 billion on dozens of redesigned or new vehicles, led by its low-cost brand, the Baojun, priced between $12,500 to $14,700.

Paul Ingrassia, Reuters managing editor, told CNBC's "Squawk Box" Tueday that slowing sales in two of the other BRIC countries is more troubling than the slowdown in China. "Auto sales in China are estimated down seven-and-a-half percent for August. It's about 23 to 24 percent in both Russia and Brazil."