- US and EU manufacturers cut prices and offered great financing deals to boost sales
- Chinese buyers raced to beat new quota restrictions on the main cities
- Japanese consumers brought forward purchases ahead of April’s sales tax increase
- Only India disappointed of the 5 major markets, with sales continuing to slip as the economy slows
- Overall, 2014 sales at 14m (red square) were up 8% versus 2013 (green line)
This may well mark not only a temporary peak, but also an absolute peak, however. US and EU sales should continue to be supported by major incentives in Q2. But China will probably slow as quotas and credit tighten, whilst Indian manufacturers are cutting 200k jobs as the auto sales slump continues.
Japan sales are forecast to fall 15% due to the sales tax, and will clearly continue to decline. 1 in 4 of its population is now over the age of 65, and there are almost as many people aged 75+ as there are children aged under 14. Equally important is that the working age population continues to hit new lows each year as the overall population declines.
WORLD NOW REACHING ‘PEAK CAR’ MOMENT
More important for the long-term, as Bloomberg report, is the fact that the world is reaching its “peak car” moment. As the blog has noted before, the average car is only driven for 1 hour a day. Car sharing, as argued by BMW and Mercedes, is clearly a far more affordable business model for cities in the future, as it operates on a ‘pay to use’ basis.
The key issue is that cars are only a mechanism for going from one place to another for most people. Only a minority of people actually like owning and driving them. So the need that will be filled in the future will be for ‘mobility’, not car-ownership. This has major implications for anyone supplying the car industry, of course, as we describe in chapter 9 of Boom, Gloom and the New Normal.
The arguments against further increases in car volumes speak for themselves:
- Each vehicle in a car-sharing fleet replaces 32 new car sales, according to Alix Partners
- Even the current level of car-sharing has reduced total US sales by 500k
- Self-driving cars such as Google’s offer greatly improved journey times, if they can operate safely
- Younger people no longer see car ownership as part of growing up, and prefer to live in walking neighbourhoods
- Gridlock and pollution make the practicalities of more cars in towns impossible
Of course, it is always hard to accept that major change is inevitable. As Bloomberg report, the world’s first urban planning conference in 1898 spent its time worrying that an inevitable rise in the use of horse-drawn vehicles would lead to manure levels reaching 3rd-storey windows in New York.
As General Casey argued recently, leaders need to learn to “see around corners“. They must resist the wishful thinking that says things will never change. The coming decline in global car sales will be a good example of his message coming true.