Global auto markets depend on China for growth

Consumer demand

SHARE THIS STORY

All autos Jul14Global auto markets have started to move in new directions.  That much is clear from comment by the major national auto associations.  This will be a shock to manufacturers, who have over-expanded production.  Price wars and capacity cutbacks are inevitable if the industry forecasts are correct.

The chart  starts from 2005, and shows the 7 major markets, which account for around 4 out of every 5 cars sold in the world.  It shows how uneven the recovery has been since 2008 (2014 H1 data is annualised for comparison):

  • US sales peaked at 17m in 2005 and are forecast to be 16m in 2014 (green)
  • The key to the post-2009 recovery has been sub-prime financing, making new cars cheaper than used ones
  • China sales took off when its stimulus led volumes to jump from 6.7m in 2008 to 10.3m in 2009 (yellow)
  • Stimulus also temporarily made the EU the world’s largest market in 2009 at 14m, but it is now 12.6m (red)
  • Japan peaked in 2005 at 4.7m, but April’s VAT increase has dampened the impact of the 2012-13 stimulus (blue)
  • Russian sales have risen and fallen with the oil price since 2005, but sanctions are now reducing them (orange)
  • Brazil sales were motoring ahead with the World Cup/Olympics, but are now slowing (purple)
  • India sales peaked in 2012 at 2.6m, and now seem to be stabilising at 2.4m (light blue)

Overall, the key to growth since 2007 has been China.  As the arrows show, sales in the other 6 major markets totalled 40.2m in 2006.  At H1 levels, they are almost exactly the same in 2014 at 40.1m.

This highlights the critical importance of the new leadership’s policies to the global auto market.  They clearly need to maintain auto sales due to the industry’s importance for employment.  But they are more focused on low-cost cars, in the $7k price bracket, more suitable for potential buyers in the Tier 2 – 4 cities outside Beijing and Shanghai.

This highlights a major shift away from the past years, where the wealth effect from the property bubble allowed the Tier 1 cities to buy more Western-type cars.

Another factor is the war against corruption, which seems likely to hit Volkswagen particularly badly, as its Audi cars have been the car of choice for most government officials.  The leadership is now aiming to scrap the use of official cars, as only 1/3rd of mileage is for proper purposes.  Junior officials have already been told they will lose their official cars and be given an $80/month allowance instead.  As China Daily commented:

The measures build on President Xi Jinping’s campaign against lavish spending for government officials, who’ve long been used to riding in Audis. The announcement also follows directives for the government to bolster its purchase of electric cars and local branded vehicles.”

Past performance is therefore unlikely to be a good guide to development in the next few years.  The blog will explore these new trends in the major markets in more detail over the next few days, now we have official H1 data available.

PREVIOUS POST

Polyethylene, shadow banking and China’s ‘collateral trade'

22/07/2014

Global auto markets have started to move in new directions.  That much is clear...

Learn more
NEXT POST

US auto sales set to decline as today's credit bubble ends

24/07/2014

Global auto markets have started to move in new directions.  That much is clear...

Learn more
More posts
Smartphone market decline begins to impact global stock markets
19/05/2019

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And Pre...

Read
There’s a great future for the European plastics industry in recycled plastic
05/05/2019

Europe’s plastics industry is under major threat from the growing legislative and consumer bac...

Read
$60bn opportunity opens up for plastics industry as need to eliminate single-use packaging grows
17/03/2019

150 businesses representing over 20% of the global plastic packaging market have now agreed to start...

Read
IKEA heads into the circular world with furniture subscription trial
10/02/2019

“Once upon a time, Granny and Grandad used to go to a large shop on the motorway to buy their ...

Read
Fed’s magic money tree hopes to overcome smartphone sales downturn and global recession risk
03/02/2019

Last November, I wrote one of my “most-read posts”, titled Global smartphone recession ...

Read
Global smartphone recession confirms consumer downturn
11/11/2018

Q3 smartphone sales data show the global market in recession, as Strategy Analytics confirmed: “Th...

Read
Trump’s auto trade war adds to US demographic and debt headwinds
06/08/2018

President Trump’s auto trade tariffs are bad news for the US and global auto industry, as the ...

Read
Plastics recycling paradigm shift will create Winners and Losers
17/06/2018

My new analysis for iCIS Chemical Business highlights the paradigm shift now underway in the plasti...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more