H1 auto sales fall 2% in Top 7 markets, as BRIJ sales drop 15%

Consumer demand

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BRIJ Jul15Hi data for auto sales in world’s top 7 markets is confirming my suggestion last October that global auto sales had reached their “top of the mountain moment“.  Total volume was down 2.1% versus 2014, with sales in Russia and Brazil showing major downturns.  As the chart shows, the sales decline is focused on the BRIJ nations (Brazil,Russia, India and Japan), where only India is now in positive territory.

These had previously been expected to show fast growth, but the picture has changed with China’s slowdown underway:

Russia is the worst affected, with sales down 41% versus 2013 and 37% versus 2014.  It has been hit by lower oil prices and the Ukraine-related sanctions.  Ford have now joined the list of foreign companies having to recapitalise their business.  And Russia’s Industry Ministry and Boston Consulting Group analysis suggests recovery could take till 2020.  One sign of the liquidity problem is that used car sales are down 24% at only 1.8 million.

Brazil is also badly affected, with sales down 26% versus 2013 and 20% versus 2014.  It has been hit by China’s slowdown, which has impacted its major commodity exports.  Around a quarter of the economy depends on the auto industry and already 10k employees have been laid off, with 36k on paid leave – even so, inventories have risen to 55 days.  Dealers’ association Fenabrave now forecasts a 23% fall in total 2015 sales – equaling 1998’s collapse after the Asian crisis.

Japan saw sales down 3% versus 2013 and 12% versus 2014.  Its key problem is its ageing population – older people drive less than when they were young, as they no longer drive to work once retired or need to act as a taxi service for children.  Auto sales thus confirm the lack of logic behind Premier Abe’s vast stimulus programme.  People brought forward auto purchases in Q1 2014, in advance of April’s sales tax increase.  But contrary to the government’s expectation, sales have still not rebounded after this downturn.

India remains the bright spot amongst the 4 markets, with sales up 6% versus both 2013 and 2014.  Its 1.34m volume means it has now overtaken both Brazil (1.27m) and Russia (0.8m), and is heading back towards its peak year of 2012.   But it will take a long time for car sales to catch up those of motorbikes, which continue to dominate the market at  81% of total sales: car sales are currently at just 13%.

One interesting development is Eicher Motors‘ launch of a diesel truck that doubles as a miniature power station.  Retailing at just Rupees 232k ($3645), its 3kW supply could be ideal for wealthier homes and small businesses amongst  the 300m Indians who lack reliable electricity supplies.

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