ANALYSIS: Global light vehicle market staying strong
With a light vehicle market running at 21m units a year, China continues to be a major global growth pole in 2013
Continued recovery in the US and strong demand in China are helping to underpin the rising global light vehicle market. Data from LMC Automotive shows that while global light vehicle demand slowed a little in July compared to recent months, it remains comfortably ahead of year-ago levels.
According to LMC, the Seasonally Adjusted Annualised Rate (SAAR) for global light vehicle sales in July stood at 82.2m units a year, a little down on June's level in excess of 84m units.
Nevertheless the global light vehicle market is on track to hit a new record this year. LMC data shows that the global light vehicle market expanded by a little over 5% to an estimated 81m units in 2012. It should finish the year in excess of 83m units.
The US market continues its path of recovery, with the latest selling rate for July not far short of 16m units a year. There are also positive signs from Europe, thanks to recent results in Western
Europe, though any form of significant recovery for that market is some time off, LMC cautions.
A big positive is China, with another record sales year in prospect. However, the results of other major emerging markets, namely Brazil and Russia, proved disappointing in July, LMC says.
North America recovery on track
US Light Vehicle sales in July were once again strong, with a SAAR of nearly 15.8m units a year.
Sales were up 14% versus July 2012 and up 8.5% through the first seven months of 2013, as the US economy continues to improve. Robust truck sales continued in July, outpacing car sales. LMC notes that the large pick-up segment maintained the strong sales pace seen so far this year, with sales in that segment up 24% and helped by a strengthening construction sector.
Canada’s light vehicle sales picked up well in July, up 7.1%, with the selling rate standing at 1.7m units a year.
Europe now over the worst?
After the longest recession in history, there are now signs that the eurozone's economy is returning to growth. While a sharp bounce-back is not in prospect for Western Europe's vehicle market, things appear to have stabilised.
Although not quite as strong as the previous month, the light vehicle annual selling rate in Western Europe, at 12.8m units a year in July, is still better than earlier in the year. The UK remains the best performer in terms of year-on-year growth among the major markets. Spain continues to be supported by scrappage incentives (recently extended once again).
LMC says that while it believes the bottom of the market has been reached, “any growth we see over the next year or so is expected to be fairly modest”. Nevertheless, a return to growth is welcome.
The Russian light vehicle market continues to be a cause for concern. Sales fell back 8% in July, with the annual selling rate dropping below 2.6m units a year. LMC says that the recently introduced loan interest subsidy scheme should give support to the market from September. Better results came in for Turkey and Poland, with the Czech Republic also pushing higher in July, helped by calendar effects.
China's SAAR is running at a whopping 21m units a year
According to preliminary data, the July selling rate for the Chinese light vehicle market was 21m units a year, down nearly 4% from a record high in June. Yet the selling rate averaged a robust 21m units a year so far this year. LMC says that the strong selling rate indicates that consumers’ appetite for new vehicles has not been dented by the economy’s recent slowdown. There is, however, a possibility that sales are being pulled ahead on an expectation that the government will impose purchasing restrictions in some cities.
On the economic front, the July export data came in stronger than expected and the official manufacturing PMI also edged up in July, suggesting some turnaround in the economy. LMC's forecast for 2013 sales remains unchanged at 21.3m units.
The Japanese market continued to lose steam on the back of waning expectations for Abenomics, the volatile stock market, and rising prices of daily items. In July, the selling rate slipped back to below 5m units a year for the first time since December.
In South Korea, LMC notes that fiscal stimulus measures seem to have helped boost sales in July, with the selling rate accelerating to 1.6m units a year, the highest rate so far this year. Yet weak exports and the ongoing labour dispute at Hyundai may undermine sales in the coming months, LMC cautions.
Brazil cools after protests
In Brazil, sales tumbled in July in the wake of the widespread anti-government protests. The July selling rate of 2.9m units a year was a 20% decline from June and the lowest rate in nearly four years. High inflation, rising borrowing rates, and falling stock prices must have also undermined sales, LMC says.
Argentina’s volatile market continued a downward correction after the selling rate spiked to a record high of 1m units a year in May. Given rampant inflation and the government’s erratic economic policies, sales are expected to continue to lose momentum in the second half of this year, LMC cautions.