The world light vehicle market is forecast to hit a new record in 2013, driven higher by recovering demand in North America and still buoyant sales in China.
Global light vehicle sales this year are projected by LMC Automotive to hit 83.4m units, some 4% ahead of last year - which was also a record tally.
LMC Automotive analyst Pete Kelly told an industry conference in London this week that the global auto industry is continuing to experience mixed fortunes. “After a period of decelerating global economic growth, recovery gets going in 2014,” he said. “The US economy will be picking up further and we'll see the end of economic contraction in the eurozone. However, we're still in a period of fragile or weak growth in some places. Outside of China, it's looking like a mixed picture for many emerging markets in 2014.”
China remains a relatively bright spot with economic growth slowed to a little over 7% a year and Kelly described China's economy as 'stable', with a rebalance taking place to prioritise consumer-led domestic demand over investment and export-led growth.
China's light vehicle market - the world's largest - should hit 21.3m units in 2013, according to LMC's forecasts, a growth rate of 11% over 2012. For 2014, China is the major source of world growth to light vehicle sales, with a further 2.6m units there helping to boost the global total to 87m units. The US light vehicle market should also gain up to half a million units in 2014, taking it over 16m units (15.6m units is the forecast outturn for 2013).
The prognosis for Western Europe is for gradual recovery in a vehicle market that has plunged to a level last seen in the early 1990s. “When you consider that the European car parc has grown by over 30% since then, the underlying picture is even worse, in terms of how far under 'natural replacement' the car market really is,” Kelly noted. “One thing that does suggest is that when economic conditions in Europe have really improved for a while, the car market could see a degree of additional boost from accumulated pent-up demand.”
Europe as a whole (including Central and Eastern Europe) is forecast to see a light vehicle market of 17.4m units in 2013, down 3% on 2012. The Russian light vehicle market is forecast at 2.8m, 4% down on the previous year. “We still believe that Russia has good long-term automotive growth prospects,” Kelly maintains. “The economy there is seeing a temporary pause, but prospects remain very positive for further growth of car ownership as average incomes rise.”
Under pressure European OEMs won't see much relief on capacity utilisation in the short-term however, with light vehicle production in Western Europe projected at just 12m units in 2014 (compares with 12.3m units in 2013 and 14m units as recently as 2011). “It's obviously good to see the market picking up again,” says Kelly. “But we are talking about a pretty shallow demand recovery that will take some time to flow into significantly higher vehicle production levels.” By 2017, LMC estimates that the recovery will have taken light vehicle production in Western Europe to 13.5m units. Growth of production will be stronger in lower cost Central and Eastern Europe where local demand is expanding fast, with vehicle production rising from 6.8m units in 2013 to 9.1m by 2017.
Mixed fortunes for emerging markets in Asia
Kelly also described a mixed picture for vehicle demand in Asia, with growth in China this year contrasting with market reversals in India and Thailand. “India has seen something of a setback on its economy with the depreciation of the rupee and some dent to confidence. Economic growth has eased lately,” said Kelly. “But we remain very confident about long-term prospects for the light vehicle market in India. It's still low given the size of the population and future economic growth will raise incomes and lead to higher rates of motorisation.” India's light vehicle market is forecast to grow to 8.2m units by 2020, compared with around 3m units a year now.
Thailand is another significant Asian market seeing a market pause currently. New vehicle sales in Thailand fell 37.7% to 88,989 units in October, compared with record year-earlier sales of 142,839 units, according to data released by the Federation of Thai Industries. The sharp decline reflects withdrawal of first-time buyer incentives at the end of last year, with order fulfilment remaining strong throughout the first half of 2013.“The situation in Thailand is one of market payback following the ending of incentives,” Kelly maintains. “But the market there will recover and the picture for south-east Asia remains essentially positive for the longer-term, especially with respect to rising demand in Indonesia.”
China, however, looks set to remain the major growth pole for the global auto industry, in terms of both demand and supply. “The market in China is projected to grow to 33-35m units a year by the end of this decade,” Kelly says. “It really is a very positive picture underpinned by rising replacement demand reflecting ongoing growth of the vehicle parc – plus still rising new demand and motorisation. Average incomes in China are forecast to rise from around USD8,000 a year now to USD14,000 a year by 2020. That will bring with it a rise in per capita car ownership [cars per thousand population] from around 50 currently to around 150. China still has plenty of untapped market potential.”
2013 Light Vehicle Market By Region (Forecasts)
Mixed Fortunes in Asia
GDP LV market
China 7.2 11.0
Korea 2.2 0.1
Japan 1.9 -1.5
India 4.5 -11.7
Thailand 3.2 -8.5
Indonesia 5.6 5.7
Source: LMC Automotive