Global Auto demand cannot rely on China – study
Mark Victory
01-Mar-2016
LONDON (ICIS)–Changing demographics make it impossible for global automotive demand to continue to rely on sustained new demand from China, according to a new joint study from ICIS Consulting and International eChem.
“The winners will not be those supplying China’s OEM sector, but rather those that invest in its developing used car market,” the report, Demand: The New Direction For Profit, states.
Central to the study’s analysis is the extra 1bn people that will be in the 55+ age group by 2030 – the age group that typically spends less money and drives fewer miles. As the study points out, many of these will be in China, where median income levels are well below western levels and where pollution is becoming a major problem, necessitating a shift in focus among automakers to affordability, sustainability and efficiency.
“Inevitably, therefore, the demand surge seen in the
SuperCycle is now reversing. The New Old already own most of
what they need, and their incomes decline as they move into
retirement… the impact of these crucially important
developments has been obscured in recent years by vast
stimulus programmes,
“Of course, stimulus does provide a one-off boost to demand.
But stimulus also increases a debt burden for the future, and
thus reduces future demand as both the debt (and associated
interest have to be repaid. The impact of China’s stimulus
(half of the global total between 2009-2013) is now proving
even more negative,” the study says.
The study also cautions that the recent recovery in US new car sales has been the result of extensions in credit terms, meaning that “the average new car buyer is unlikely to return to the showroom before 2021.”
Combined passenger car sales in the key global auto-producing regions of China, the US, Europe, Japan and Brazil fell 0.23% in January year-on-year, according to ICIS analysis.
The falls came amid the high volatility in global financial and crude oil markets, which may have had a knock-on effect on consumer confidence.
Since the launch of the Global Automotive report in October 2015, ICIS has been warning that underlying statistics, such as the US labor participation rate, pointed to a US macroeconomy that was more vulnerable than widely believed, and that any Fed interest rate rise had the potential to expose those weaknesses. Declining US light vehicle sales in January suggest evaporation of consumer confidence and worsening general economic conditions.
The new scenario study by ICIS and the independent UK chemicals consultancy, International eChem, is the culmination of five years of ground-breaking forecasting work. It has been developed by a team of experts who have many decades of industry experience in all the main product areas and geographies, and is under-pinned by data from the ICIS global Supply & Demand data analytics platform. It enables you to examine the data and analysis underlying key trends and to see how our experts predict three very different potential scenarios will play out for petrochemicals markets.
Guidance is also provided on how to correctly prepare, plan and pivot for different crude oil price scenarios, and to identify major new revenue and profit growth opportunities in the petrochemical value chain. To find out more about “Demand – The New Direction for Profit,” click here.
The automotive industry is major
global consumer of petrochemicals which contribute more than
a third of the raw material costs of an average vehicle. ICIS
tracks the movement of petrochemical raw material costs in
auto production both globally and regionally with the
weighted ICIS Basket of Automotive Petrochemicals
(IBAP).
ICIS has launched a Global Automotive report covering the
major automotive chemicals markets, and auto-industry and
macroeconomic trends. For more information on the report and
details on how to subscribe, please email automotive@icis.com
ICIS has produced a free on-demand webinar on recent trends in automotive petrochemicals raw materials. In the webinar, Mark Victory, Senior Editor, Manager, ICIS, discusses recent and future trend in automotive petrochemical raw materials. He examines the difficulties in pricing petrochemical raw material costs for automotives from upstream and feedstock costs. Mark also discusses forecasts for supply and demand changes to 2020 and what they will mean for the market, as well as analysing future trends for the automotive industry itself. To watch the webinar, click here
ICIS has published a global automotive
petrochemical outlook which examines the major trends
expected in 2016 for regional petrochemical markets and
macroeconomics, global crude oil and gasoline trends, and
takes a closer look at the PP, isocyanates and PVC markets in
Asia, Europe, and the Americas. To access your free copy,
please click here
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