The Trade Numerologist: Car trade is cruising

05 Jan 2018 John Miller

Despite populist political turmoil, Western economies are still humming. One barometer: the robust health of the global auto trade.

Under pressure from environmentalists, governments are forcing firms to reduce carbon emissions. That didn't stop car companies around the world from churning out around 80 million units this year, up 33% from around 60 million at the start of the century.

Despite rising protectionism, ocean ships are ferrying more wheels than ever. Over the first six months of 2017, nine of the world's biggest 10 auto exporters increased shipments, according to data from IHS Markit's Global Trade Atlas.

Top exporters, cars, trucks and parts, first 6 months of 2017

Germany$128.7 billion (-0.5%)South Korea$31.9 billion (+1.2%)
Japan$69.5 billion (+4%)China$31.8 billion (+8.9%)
US$65.5 billion (+4.7%)Spain$29.4 billion (+1.5%)
Mexico$48.2 billion (+13.6%)UK$26.3 billion (+1.4%)
Canada$32.7 billion (+0.5%)France$26.1 billion (+1.73%)

Germany still dominates global car trade, thanks to flagship firms like Daimler, BMW, and Volkswagen, but its exports have been mostly flat this decade, and are still below its peak performance before the financial crisis. Over the first six months of 2008, Germany exported $138.8 billion worth of cars, roughly ten billion dollars less than their exports over the first half of this year.

The North American Free Trade Agreement is still a spectacular accelerant of auto trade in North America, generating new integrated supply chains between the US, Mexico and Canda. Between 1994, the year the deal went into affect, and last year, Mexican auto exports to the US increased to $73.6 billion from $7.1 billion. By comparison, shipments from Canada increased only 21% over the same time period, to $57.9 billion from $38.1` billion. Buoyed by the US car companies like Ford and General Motors building plants, Mexico has now passed Canada, and is the world's fourth biggest exporter.

Mexican car exports, first 6 months, 2007-2017

2007$19.5 billion2013$37.4 billion
2008$21.8 billion2014$40.7 billion
2009$13.4 billion2015$45 billion
2010$24.5 billion2016$42.4 billion
2011$29.7 billion2017$48.2 billion
2012$34.3 billion

Another auto supplier gaining market share is China. But although Western companies are quaking in their boots, it's not yet a big maker of ready-to-drive cars. Chinese automakers haven't yet cracked the code of conceiving and delivery vehicles that meet the safety, performance and tastes standards of first-world consumers.

Instead, its network of factories are turning the country's prodigious output of steel, aluminum and other metals into parts. Last year, China exported $28.5 billion in parts, but only $4.9 billion in actual cars. And it's selling more and more to the US, which could spark trade tensions in a more protectionist environment.

Chinese exports of car parts to the US, 2011-2016

2011$8.5 billion
2012$9.7 billion
2013$10.5 billion
2014$12.3 billion
2015$13.2 billion
2016$13.9 billion

The US is still, by the far, the world's most lucrative auto market, and it continues to keep it open with low import tariffs and barriers to entry, but that status could become vulnerable to protectionist trade sentiment. Also, car-hungry China is growing at a faster pace.

Top importers of cars, trucks and parts, first 6 months, 2017

US$143.1 billion (+3.6%)France$36.7 billion (-7.6%)
Germany$62.1 billion (+8.8%)Belgium$32.4 billion (+4.4%)
UK$37.3 billion (-5.1%)Italy$25.3 billion (+5.1%)
China$37.2 billion (+13.9%)Spain$24.8 billion (+10%)
Canada$36.9 billion (+6.6%)Mexico$22.9 billion (+1%)

Smaller fast-growing markets are also sparking the interest of shipping, logistics and auto firms. This summer, the government of Iran, a nation of 80 million with a big middle class, moved to limit permit on imports of foreign cars, but that was after the country's importers shipped in almost twice as much as the year before.

Fastest-growing big importers of cars, trucks and parts, first 6 months, 2017

Iran$1.9 billion (+87%)
Ukraine$1.9 billion (+57%)
Russia$9.8 billion (+44%)
Argentina$6.1 billion (+38%)
Chile$3.5 billion (31%)

The most exciting import market for automakers is, of course, China, with its billion-plus consumers. So Germany has the upper hands in delivering cars to the Middle Kingdom, but the US and Japan are catching up.

Top suppliers to China of cars, trucks, and parts, first 6 months, 2017

Germany$10 billion (+4%)Italy$940.7 million (+287%)
US$7.6 billion (+18.2%)Slovakia$844.1 million (-5.8%)
Japan$7.6 billion (+30.6%)Hungary$583.9 million (+20.7%)
UK$3.5 billion (+3.1%)Thailand$532.8 million (+226.4%)
South Korea$1.5 billion (-29.1%)Mexico$504.2 million (+4.1%)

To be sure, carmakers, of course, have not been hesitant to build plants in large markets whose governments are eager to maintain job-creating manufacturing sectors. There's too much money in cars not to make those investments in big markets. Witness the hub of German and Japanese automakers that have built car factories throughout the Southern US.

The best example of that trend is India, the world's second most populous country, barely imports any vehicles at all, only $209.9 million worth in 2016. BMW, Ford, Kia, Toyota and other big automakers all have plants in India, to avoid paying duties of over 100% on imports. Small countries don't have this luxury of using protectionist trade policy to force companies to build plants on their soil.

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The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.


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