Autos are easily the largest global demand sector for chemicals, now housing has declined. Developments in the world's 4 major markets (China, US, EU, Japan) are thus critical to the future outlook, as they account for nearly 75% of total sales. As the chart shows:
• Volumes have increased this year (red square) by 7% versus 2011 (green line)
• The main driver has been the US and Japan
• US sales are up 1.4 million due to replacement buying
• Japan's sales are up 1 million, recovering after 2011's earthquake
• China was up just 600k (6%) and the EU down 800k (7%)
Without Japan's one-off recovery, sales would only be up 4%. The long-promised complete recovery in consumer confidence has clearly not yet occurred. Worryingly, the outlook is also not encouraging.
Bloomberg suggests this year's US growth has partly been boosted via cheap loans for those with low credit scores. It says Q2 loans were up 6% versus 2011, with risky buyers accounting for 44% of the total. And it adds that more solid growth would require a recovery in non-managerial wage growth, which at 1.1% is the lowest since records began in 1965.
Equally, EU sales are unlikely to recover (if at all) for many years due to its rapidly ageing population. Older people simply do not need new cars, especially as they retire from jobs or find themselves made unemployed by austerity programmes.
China's ageing population faces similar constraints, whilst its fuel prices remain near record highs. Increasing attacks on corruption are also putting Audi's sales of its black A6 model under threat. Half of its sales are made in China, as it is the car of choice for most Party officials.