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, a new report by credit insurer Euler Hermes states. However, growth will slow. In terms of both production and new car registrations, the situation remains tense.
Is the automotive market pulling the brakes?
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In emerging countries, automotive demand appears to be running out of steam.
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.
New car registrations: a slow-down following the peak by stimulus measures?
Similar trends become evident with reference to new car registrations. Emerging markets such as China and India are stabilising in 2012 after experiencing exceptional growth during the last years, but nonetheless retain their long-term growth potential.
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. The Japanese market is structurally declining over the long term and seems unlikely to return to its pre-crisis level in the foreseeable future.
Diverging trends are beginning to appear within Europe, with solely the German market stabilising at a level close to that of 2008. “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”, says Ludovic Subran, Euler Hermes’ Chief Economist”.
Future challenges
The 2008-2009 crisis has therefore accentuated the relocation of automotive production to emerging markets, which will continue to drive growth in 2011-2012 even though they are also slowing somewhat. “Car manufacturers face a number of major challenges. They must adapt their offer and vehicle ranges to the new demand from emerging countries and, at the same time, they can only achieve sustainable competitiveness if they step up the development of industrial partnerships, in both innovation and production. An example of this being the investment that is absolutely necessary to produce a profitable green car”, concludes Wilfried Verstraete, Chairman of Euler Hermes’ Group Management Board.
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