India’s onion harvest boosts auto sales: Japan’s sales gently decline

Jap, Ind autos Oct13The blog’s pre-Budget Outlook review of the major auto markets concludes today with Japan and India.  Together they are 10% of the global market.  But their development is an excellent example of how reality can overtake the wishful thinking of policymakers:

  • Japan (red line) is the larger market.  It has lived through countless government stimulus programmes, and the terrible tsunami of March 2011
  • That of course created a dip in sales, and then a recovery, as the chart shows
  • But overall, sales have been on a gently declining trend as Japan’s ageing population drives less
  • January-September sales this year were 3.5m compared to 3.7m back in 2005
  • India (blue) has seen genuine growth, with sales rising steadily until last year
  • But sales are half Japan’s as average incomes are just $1k/year, so two-wheelers dominate the market
  • Overall, auto sales growth ended between 2011-12, as the economy began to slow
  • January-September sales were 1.8m, compared to 2m in 2012

The chart thus highlights how stimulus packages have only a temporary effect.  Buyers are not stupid – they will take the money if government pays them to do something they were going to do anyway.  But cash hand-outs only bring forward sales, and don’t create new demand.

Instead, demographic issues and income levels are critical, as the blog discussed in its recent article.  For as Forbes magazine reports,

“The core auto markets of Australia, New Zealand, Japan, Canada, United States and Europe are either growing slowly or in decline as people cut back on spending”

Understanding these new drivers opens up new opportunities for companies to profit from them.  India’s top-selling Maruti Suziki auto company have done just this over the summer, spotting that an excellent onion harvest (onions are, of course, a key ingredient in Indian cooking) is creating a new market for their cars in rural areas.

Currently one in three of their sales is being made to a rural customer, helping to boost volumes whilst sales to city-dwellers decline.  5 years ago, by comparison, the ratio was just one in thirty.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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