The world automotive market recovered its average annual growth rate of 4% to 5% in 2011 and is expected to remain on a positive trend in 2012, although growth will slow.
- The world automotive market recovered its average annual growth rate of 4% to 5% in 2011 and is expected to remain on a positive trend in 2012, although growth will slow.
- Emerging market demand, which drove growth in the automotive sector in 2009-2010, slowed in 2011 and will continue to do so in 2012.
- In industrialised countries, the market remains far below its level prior to the 2008-2009 crisis, particularly in Europe where there is still significant overcapacity.
- The main challenges facing car manufacturers are to adapt their offer to emerging markets and to develop industrial partnerships in the areas of innovation and production.
Production: growth solely driven by new markets
Automobile production has increased by 11% worldwide over the past five years. However, Europe (-11%), North America (-22%) and Japan (-34%) have stayed well behind over the period. The emerging markets, led by China with growth of 123%, have driven growth for the sector. Thanks to increasing per capita GDP and low car-ownership rates which have boosted demand, the automotive industry grew by 24% in Latin America and, despite the exceptional slump in the Japanese market, by 40% in Asia.
The situation in Europe is more heterogeneous: only Germany has managed to reach its pre-crisis production levels, while production volumes in Spain, France and Italy are still down by respectively 20%, 36% and 38% compared with their 2007 levels. These three markets have suffered from the fall in demand, but also in the case of France and Italy, from the relocation of a large part of their production to ‘low cost’ regions.
In Japan, which suffered the terrible earthquake and tsunami in 2011, the automotive sector’s recovery is even weaker than in Europe. The country’s competitiveness has been undermined by the strong appreciation of the yen against the euro.
At the same time, Korean car manufacturers seem impervious to the crisis and continue to gain market share, with 7.5% of world production in 2010 compared with 4.6% in 2005.
New car registrations: a slow-down following the peak driven by stimulus measures?
After two buoyant years, the Chinese market is experiencing a lull in 2011-2012 with forecast growth of ‘only’ 4% to 5%. However, there is no question as to the potential of this market where the car ownership rate (5%) is only one twelfth of the rate in Europe (60%).
India, the other major emerging market, dipped slightly in 2011 and will stabilise in 2012 under the impact of interest rates that have begun to become prohibitively high and the flop of the ultra cheap car. India nonetheless retains its long-term growth potential.
The Brazilian market is also stabilising in 2011-2012 (+2% in 2012), due to the higher price of imported cars, which are heavily taxed, and to rising interest rates.
The Russian market continued to benefit from a car scrapping scheme in 2011 but growth is expected to come to a halt (0%) in 2012.
Very depressed from 2008 to 2010, the US market has been recovering since then thanks to vehicle replacement and is expected to grow by 8% to 10% in 2012.
After a catastrophic year 2011, with a fall of 15%, Japan will experience a technical rebound (8%) in 2012. This improvement will, however, be only temporary as the Japanese market is structurally declining over the long term and seems unlikely to return to its pre-crisis level in the foreseeable future.
European automotive industry set to break up?
Car sales have continued to decline in Europe in 2011, particularly in the south. “The European automotive market is unfortunately still far below its pre-crisis level, by at least 15%”, says Ludovic Subran, Euler Hermes’ Chief Economist. “Economic reality has naturally caught up with the market. With stimulus measures at an end and austerity now the watchword in most European countries, the automotive industry can only continue its slow agony and can be expected to contract by another 3% to 5% next year.”
“Very diverging trends are beginning to appear within Europe”, he added. In the United Kingdom, Italy and Spain, the markets are still 20% to 50% below their pre-crisis levels and no rebound is expected in 2012. In Germany, however, the market is stabilising at a level close to that of 2008, with 3.1 million new car registrations forecast for 2012 (1.5% less than in 2011).