US down, Western Europe down, Japan down. What's going up? Brazil, Russia, India and China are.

They call them the BRICs because the title letters of each country taken together create the vision of building blocks. If the hierarchy were followed sequentially, they would be called the CRBIs, which is nowhere near so neat.

When the motor manufacturers of the world grow weary of this gathering cyclical recession in the mature markets, they need only go to the top of the building and use the magic telescope. Growth markets are a long way away, but they are there and growing fast.

Last year's car and truck sales hierarchy read thus:

  1. China:    9.16m
  2. Russia:  2.75m
  3. Brazil:  2.40m
  4. India: 1.97m

Together:  16.28m

But growth rates ranked thus:

  1. Russia 29.0%
  2. Brazil  24.0%
  3. China  18.3%
  4. India   9.2%

Together:  11%

The mature markets which make up two thirds of the world demand have been one or two percent growth now for some time. This year has been forecast at 1% growth but is slowly tumbling back below zero. However, the other third of world demand is growing at 11% which means that the total word market is growing just below 4%. In the days before there were any BRICs, 4% global growth was a record year.

China is the huge part of it, of course.  Its own central planning forecast is that it will reach a parc of 140m vehicles in just 12 years time in 2020. That is a mind-boggling seven times the current level and the maturity level of cars in the US.

Morgan Stanley had an interesting take on this when their man Adam Jonas published an investment note recently. He reckoned that the makers that will make the money are the value brands and the bling brands. The middle-market brands struggle.

One of the reasons that Porsche has been making so much money that it had to spunk it all on buying Volkswagen, was that for the 25% volume growth it was getting in the BRICs it was making 40% margin growth.

There are shortages of prestige cars in China, and many impatient customers keen to flaunt wealth and success with exotic specs and queue-jumping delivery.
Jonas also reckons that dollar millionaires are growing at the rate of 8% a year in the BRICs which is five times the rate of growth in global population.

How far can car penetration grow in the BRICs? A long way still and potentially within a short space of time given the virtuous circle of wealth generation created by on-shore car production.

US, EC and Japan stopped growing car sales when they reached 72% penetration of population of car-driving age.

Russia at 22% is not yet a third of the way. Brazil is still only 14%. China and India are less than 3%.

To give meaning to all that - every 10% move in the cars per head figure for the emerging markets (that's BRICs plus the smaller markets) needs 460 million vehicles.

If it happens like that, the target of small annual improvements in CO2 for the fleet in US, EU and Japan will never keep pace with the CO2 production increase caused by the growth in the global fleet.

Rob Golding