Same-Day Analysis: IHS provides overview of global vehicle demand development to 2023
IHS analyst Charles Chesbrough recently provided an overview on the state of the global market, noting that emerging markets continue to be key to growth, particularly China. Although global auto sales are forecast to continue on an upward trend through 2023, the pace of growth will reach its peak in 2019.
IHS Automotive Perspective
- Significance: IHS has provided an overview of expectations for the global market until 2023. In 2019, the market is forecast to reach its peak growth pace; after that, global growth will moderate. The key to growth in future remains in China and emerging markets.
- Implications: The growth in emerging markets is forecast on increasing real GDP per capita, as higher incomes create strong demand and need for personal transportation. The performance of mature markets, on the other hand, will be based on replacement demand.
- Outlook: IHS Automotive forecasts the global automotive market will reach 100 million units by the end of the decade. Although mature markets will continue to sell more vehicles each year, it will be emerging markets which provide positive sales momentum. One common element: Mature and emerging markets are seeing growing demand for SUVs.
IHS Automotive is holding its Spring Conferences at locations around the world in March, covering global and regional outlooks for the economy, sales, production, technology, urban mobility and powertrain trends. At the most recent event in Michigan, analyst Charles Chesbrough provided an overview of the state of the global market.
One of the major impacts on the health of the light-vehicle market is the fall in commodity prices, according to Chesbrough, including steel, aluminium, plastic resins, rubber, glass and iron. Prices have fallen 51% from 2011, after peaking near USD2,200 per car in 2008 for a typical 3,500-pound vehicle. Although the fall in commodity prices has been a negative drag on the energy sector and for emerging markets, many of which are sources for these materials, it has been positive for the automotive market. The change has enabled stronger profit margins and enabled automakers better flexibility for the future.
The key to light-vehicle sales growth in the future remains China. Between 2009 and 2016, global light-vehicle seasonally adjusted annual selling rates (SAAR) have grown by 61%, Chesbrough noted. However, China's SAAR alone has increased 202% over that time period. Without factoring in China, worldwide light-vehicle SAARs have grown by 35% from 2009 to 2016. We have also seen a divergence in the performance of emerging markets. China has continued to see SAAR growth, while South America and Eastern Europe, largely on performances in Brazil and Russia, have both notably declined.
Taking a look at the forward momentum, IHS forecasts the worldwide market will reach 100 million units by 2020 - however, a growth peak is also approaching. IHS forecasts the peak in growth rates will be in 2019, when the market's growth rate will average about 3.2%. By 2022, that will fall below 2.0%. Mature markets have limited growth potential after 2019, as the US and Europe end up on the flip side of recovery and some markets see vehicle saturation, declines in population and stronger urban transportation alternatives. Also by 2019, we expect the turmoil in emerging markets to largely be settled, enabling stronger growth in those regions in the future. However, Chesbrough says that although emerging markets are key to growth, they will not be enough to offset cooling growth in the US and Europe. Growth opportunities in mature markets will be in niche markets and segments, however, not found in aggregate market growth. Growth in emerging markets is dependent on rising incomes. Mature markets developed higher vehicle penetration as higher incomes created strong demand and need for personal transportation; IHS expects emerging markets will follow a similar path.
For China, IHS expects that recent declines in the pace of growth are only temporary, and that the fundamentals remain positive. We forecast that 230 million light vehicles will be sold in China between 2016 and 2023 - although the weaker conditions did prompt IHS to remove 8 million units of sales from the market forecast. The overall outlook suggests that the Chinese automotive market continues to have a positive outlook, forecast to see a compound annual growth rate of 3.5% between 2015 and 2023, compared with a CAGR of 16.2% in the decade from 2005 to 2015; we forecast growth in 2016 of 5.5% to 25.5 million units. The reasons for a positive view on China include that car prices remain low and interest rates are declining, while the sales tax on cars with engines smaller than 1.6 litres helped spur sales. The most promising element for China is that its vehicle penetration is still a low 120 vehicles per 1,000 people - compared with about 275 in Argentina and Mexico and more than 800 in the US. GDP per capita is currently less than USD10,000. As that figure increases, more consumers will be coming into the market.
Excluding China, IHS forecasts emerging markets will sell a total of 198 million light-vehicles between 2016 and 2023, with annual sales of 19 million units increasing to 30 million units. IHS expects economic development in these countries to keep sales on a growth path, although sales in emerging market regions are likely to remain volatile over the near term.
Although IHS forecasts that emerging markets will see growth on rising per-capita GDP and improving economic conditions, growth in mature markets will shift to replacement demand as the key driver. IHS forecasts mature markets will sell a total of 352 million vehicles between 2016 and 2023, although annual sales pace will fall from 44 million units to 43 million units over that time period. In this environment, customer loyalty will be increasingly critical to automaker success.
Outlook and implications
IHS Automotive forecasts the global automotive market will reach 100 million units by the end of the decade. Although mature markets will continue to sell more vehicles each year, it will be emerging markets that provide positive sales momentum. As demand in mature markets shifts to replacement demand, customer loyalty will be increasingly important for automakers to nurture and maintain.
One common element is that mature and emerging markets have seen growth demand for SUVs. Since 2012, the pace of growth for utility vehicles has outpaced average market growth emerging markets as well as mature markets. IHS forecasts sales of SUVs will reach 2.63 million units in 2023. Of that 2.63 million, about 25% will be sold in North America, 36% in China and 21% in Europe.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.
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