October appears to have been a mixed month in terms of vehicle markets. The US light vehicle market came in quite strong, with retail sales enjoying a bit of a surge. And who would begrudge Chrysler a bit of good news?
US SALES: October SAAR best since September 2008
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The big question for the US vehicle market is the 2011 outlook. Can a recovery to sales be sustained given the low-growth prognosis for the US economy? If unemployment stays high and house prices fall, the consumer may not be in the mood to spend – even if past experience suggests that they ought to be looking to replace vehicles. Maintaining momentum for the recovering auto industry will likely be a challenge.
Uncertain economic prospects are also a problem for the outlook in Europe where the car market is going into reverse now that support from scrappage schemes has ended. The German economy is key. Exports from Germany have been very strong this year, helping to compensate for lower orders at home. And it’s not just emerging markets; German exports to the US have picked up this year.
The VDA forecasts an increase of 21% in German vehicle exports this year and a gain of at least 10% in overall production. The premium carmakers are doing well. If overseas demand cools, the German economy could quickly slow. Arguably, Germany is already adopting an over-prudent fiscal stance when Europe needs its biggest economy to expand more quickly. The economic growth versus fiscal responsibility debate in Europe will continue, but 2011 is certainly not shaping up to be a year of sharp bounce-back for the European auto industry. The fact that interest rates are being kept on the floor says it all about how the authorities feel this economic recovery is going.
UK: West European car market down 18% in October
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By GlobalDataGERMANY: VDA positive despite another monthly sales fall
SPAIN: Car sales to fall in 2011, consolidating three-year decline
FRANCE/SPAIN: Industry concerns as sales slump continues
But the news is not all bad. While the mature automotive markets and developed economies struggle, the global auto market continues to benefit from growth in so-called emerging markets (some of which have well and truly ’emerged’). It’s not just the BRICs; vehicle markets are strong, for example, in ASEAN and in Turkey.
In fact, global vehicle assembly is heading for a new record this year – at around 70m units. A China light vehicle market approaching 17m units this year compares with just 7m units in 2007. Can they keep such a phenomenal rate of growth going in China? Many in the auto industry around the world will be praying that they can, that real incomes keep growing and that emerging market car buyers can continue to offset sluggish demand elsewhere.
INDONESIA: ASEAN sales up 36% in January-September
TURKEY: Car market continues to soar in October
UK: BRICs drive light vehicle assembly to record year
And if you wanted confirmation on how the global balance of power is shifting, take a look at British Prime Minister Cameron’s state visit to China this week. It’s more a trade mission than a visit by a head of state – come to think of it, so was President Obama’s trip to India this week which culminated in the slightly over the top remark that the 21st century will be defined by the partnership of the US and India (actually, a totally meaningless statement when you think about it, but one that might have gone down very well in Delhi).
And human rights in China? It may be mentioned by Mr Cameron, but in a going-through-the-motions-don’t-want-to-cause-offence kind of way. China’s leadership may eventually have to listen to its own people, but it is under no pressure to listen to foreigners who are, in any case, climbing over each other to do business with Beijing.
