The latest forecast from JD Power sees global light vehicle production rising by 13% to 67.7m units in 2010, driven mainly by soaring demand in emerging markets.

By 2011, overall production is projected at 72.8m units, which is ahead of pre-crash 70.4m vehicles produced in 2007.

However, JD Power Automotive Forecasting analyst Pete Kelly cautioned that future growth is mainly coming from emerging markets, with mature markets subject to a continuing squeeze on consumers as result of the economic fallout from high levels of national debt.

The pan-European car market is projected by JD power to decline by 5% in 2010 and Kelly maintains that there are numerous risks to the outlook.

“I think that while the policy action to the Greek crisis has averted the possibility of an imminent meltdown, subsequent action by governments to cut spending and raise taxes will hurt demand for new cars. The bad news for consumers may start coming within months, rather than years, and the pain of deficit reduction looks likely to be around for quite a while,” he says.

For the US, the prognosis is similarly cautious, though recovery is much stronger so far, with the light vehicle market projected to recover to 11.8m units in 2010 and 13.7m units in 2011 – a solid recovery, but still way off previous market peaks.

The BRIC markets will account for a third of global light vehicle sales in 2010, up from around one fifth in 2007, before the crisis had hit. China is the dominant driving force in this expansion with a potential 15m light vehicle market in 2010.

Kelly also says that the global market move towards small cars will leave the segment more crowded, with clear implications for profitability in a low-margin area of sales.

“Growth in small car demand creates a big challenge for vehicle makers,” Kelly maintains.

“They have to work out how to add margin and make them more profitable and the competitive pressures will be rising as the segment gets increasingly crowded. Product execution will be critical as more players move into unfamiliar territory.”

Kelly also sees better prospects ahead for the premium brands.
“New middle class buyers in emerging markets recognise and aspire to the premium brands and, even though premium sales in many emerging markets are currently low in volume terms, they are growing faster than the overall market. Meanwhile, premium brand sales in mature markets have been quickest to recover, having not benefited from scrappage schemes and therefore not needing to come back down to earth this year, something with which volume car manufacturers will have to contend, especially in Europe.”

Dave Leggett

World Light Vehicle Sales, mn
2009 2010 2011
World 63.9 68.9 73.5
Pan-Europe 18.2 17.3 17.5
USA 10.4 11.8 13.7
BRICs 19.6 22.7 24.6