According to LMC Automotive, the global light vehicle market ended 2014 on a high note with a best ever seasonally adjusted annualised rate of sales (SAAR) of 92m units a year posted in December as dealers and OEMs across the world aimed to hit their volume targets. But what of the outlook for 2015? In a series of features, we analyse developments in major markets, starting with an overview and a look at North America.
LMC estimates put the world’s light vehicle market for the year at 87.2m units, some 3.5% ahead of 2013. The positive global result was boosted by mainly by higher sales in North America, China and Western Europe. Those positives were stronger than market negatives recorded elsewhere, chiefly in emerging markets of Eastern Europe and South America.
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What about prospects for 2015? Sales in North America continue to grow, but they are forecast to be flattening out in the US. China is slowing, in line with its economy, but still forecast to see some growth. Western Europe’s car market is expanding again, albeit off a very low base; but 2015 sees growth fall back from 2014’s level. The current uncertainties presented by Greece’s unclear eurozone status coupled with ongoing economic problems to the east in Russia look set to keep Europe’s car market in a low gear this year.
However, the net picture for the global light vehicle market is likely to be one of growth again. Consultants at Frost & Sullivan forecast that global light vehicle sales this year will cross 90m units due to substantial growth in the US and Europe which will balance the slowdown in the emerging markets. It says ride-sharing, intelligent mobility and big data analytics are key trends that will influence the market in 2015. F&S takes an upbeat view and sees a boom driven by falling fuel prices and ageing vehicles. The average age of cars on the road crosses 13 years in the US and 10 years in Europe, it says.
And they also pick out a number of trends that will be helping to push sales higher. “OEMs such as Fiat, Renault, Jaguar, and Porsche have been aiming key vehicle models at women. Smaller city cars started the trend but traditionally ‘male’ categories such as luxury and SUV are following. The top 10 OEMs will launch 4 to 5 vehicle models aimed specifically at women by the end of 2015,” notes Frost &Sullivan Senior Partner, Sarwant Singh.
They also see potential in fuel-cell vehicles which could start to make a mark in 2015. “Toyota will lead the way with the launch of the Mirai and the sharing of 5,600 hydrogen patents,” notes Frost & Sullivan Analyst, Shwetha Surender.
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By GlobalDataIHS also sees global growth slowdown
The analysts at IHS also forecast that growth of the global light vehicle market will slow in 2015, weighed down by weaker sales in many emerging markets and Europe. Nevertheless, IHS forecasts that the market will grow to 88.6m units, an increase of 2.4% over 2014.
Growth of the world vehicle market in 2015 would continue and unbroken five-year run of sales recovery and growth from the last low point set in the depth of the recession in 2009. However, IHS also points out that a slowdown is being signalled with just two of the high-potential BRIC markets likely to see increased sales this year.
IHS says that China and North America will lead the upswing
The size of the contraction of the Russian car market remains a significant wild card that will impact the European market throughout the year, according to IHS, while other countries in the region continue to recover at a rate of 2.5-3% percent, helped by the European Central Bank’s (ECB) commitment to “quantitative easing”.
Global economy: it’s a mixed picture
The global economy is seeing some marked regional performance divergences as well as major uncertainties caused by a rapid decline in the price of oil in the fourth quarter of 2014. Forecasting bodies says that while global growth will receive a boost from lower oil prices, which reflect a supply boost, there will also be negative impacts including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies.
The IMF, in its latest World Economic Outlook update projects global economic growth in 2015 at 3.5% (2014 estimated at 3.3%) and 3.7% in 2016. Those forecasts were revised down on its October assessment and “reflect a reassessment of prospects in China, Russia, the euro area, and Japan as well as weaker activity in some major oil exporters because of the sharp drop in oil prices.”
One bright spot for the global economy is the continued strong performance of the US, where economic growth has exceeded expectations. The IMF has recently raised its growth projection for the US economy. The World Bank has cut its global growth forecast, warning the US alone cannot drive an economic recovery. In its latest forecast, the World Bank has warned of the difficulty for the world economy of relying too heavily on growth in the US. “The global economy is running on a single engine…the American one. This does not make for a rosy outlook,” World Bank chief economist Kaushik Basu said.
China has been an engine of growth for the global economy, but it is now slowing. Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown.
On the upside, lower oil prices will put downward pressure on goods prices generally and extend the period of very low interest rates. However, there is also the danger that falling prices, especially in Europe where consumer and business confidence remains extremely fragile, could produce a further weakness to demand and set back economic recovery further.
Despite more pessimism at the World Economic Forum in Davos this year, central bankers and economic leaders were relatively upbeat about economic prospects for the year ahead.
The ECB decision on quantitative easing (QE) lays the ground for some stimulus in the eurozone. “We have done our part, but the ECB cannot raise productivity, increase employment or encourage investment. That requires a more comprehensive set of reforms,” said Benoît Coeuré, Member of the Executive Board, European Central Bank, Frankfurt. Explaining the ECB’s intervention, he said: “We could not sit by and watch the political foundations of the European project being undermined.”
Japan is also well into implementation of a programme that includes aggressive monetary easing, gradual fiscal consolidation, and structural reform that are intended to lay the foundations for 2% growth this year. Haruhiko Kuroda, Governor of the Bank of Japan, is upbeat not only about Japan’s growth prospects but also about China. “China is making huge structural reforms while continuing to grow at 7.5%,” he said in Davos.
US car market on track, but peaking
Market recovery remains on track in US. After a 16.5m unit light vehicle market in 2014, forecasters expect modest growth to around 17m units in 2015. The US economy continues to show a relatively strong performance with real wages and employment levels rising.
LMC Automotive is maintaining its 2015 retail sales forecast at 14m units and its total light vehicle sales forecast at 17m. “The auto industry is starting 2015 on autopilot with January also relatively strong after a vigorous December,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. Forecasters maintain that the market is likely to see some flattening as pent-up demand that drove it up in recent years eases. However, Schuster points to good fundamentals on the US economy and sees some upside to the apparently cautious assessments being made for the market in 2015. “Growth of 3 percent should be easy to achieve as the risk could be centred more with automakers and suppliers not being able to keep up with demand if growth were to be stronger than we project.”
The assessment of analysts at IHS is in line with LMC’s, with a US light vehicle sales forecast for 2015 of 16.9m units.
“Although the economic conditions and pace of recovery differ slightly among the North American countries, consumer confidence, credit availability and pent-up demand have played key roles in sustaining auto demand momentum since the Great Recession,” said Chris Hopson, manager, North American light vehicle sales forecasting, IHS Automotive. “This should help motivate sales once again in 2015.”
IHS Automotive projects regional light vehicle sales volume in North America to hit more than 20m units in 2015, up 2.5% from last year.
In the US, IHS Automotive analysts continue to believe the upside risks for auto demand are more apparent than the downside risks – fuelled by lower energy prices. With a strong exit to 2014, and gasoline prices currently plunging, IHS says that “consumers may feel even more positive throughout 2015”.
NA vehicle production to grow in ’15
Vehicle production in North America ended 2014 at 16.9m units, a 5% increase from 2013. Significantly outpacing the annual increase, production in December was at 1.2m units, 16% stronger than December 2013.
Vehicle output in North America is expected to continue to increase in 2015, but with a slowing growth rate. LMC Automotive is maintaining the current forecast for North American production at 17.4m for 2015, a 3% increase compared with 2014. Production in the first quarter of 2015 is projected to reach 4.3m units, a 4% increase compared with the same period in 2014.
Coming next: Europe
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| Sales (units) | Selling rate (Units/year) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| WORLD | Dec 2014 | Dec 2013 | Percent change | Year to date 2014 | Year to date 2013 | Percent change | Dec 2014 | Year to date 2014 | Year 2013 | Percent change |
| WORLD | 7965381 | 7377278 | 8.0% | 87166563 | 84225254 | 3.5% | 92,065,276 | 87,166,563 | 84225254 | 3.5% |
| USA | 1504467 | 1357044 | 10.9% | 16490861 | 15572933 | 5.9% | 16,810,034 | 16,490,861 | 15572933 | 5.9% |
| CANADA | 131393 | 113223 | 16.0% | 1852817 | 1742475 | 6.3% | 1,917,002 | 1,852,817 | 1742475 | 6.3% |
| WESTERN EUROPE | 1031481 | 999052 | 3.2% | 13554779 | 12887851 | 5.2% | 14,040,556 | 13,554,779 | 12887851 | 5.2% |
| EASTERN EUROPE | 507502 | 510074 | -0.5% | 4551297 | 4937213 | -7.8% | 5,177,484 | 4,551,297 | 4937213 | -7.8% |
| JAPAN | 423280 | 413928 | 2.3% | 5444030 | 5255108 | 3.6% | 6,239,295 | 5,444,030 | 5255108 | 3.6% |
| KOREA | 165769 | 134370 | 23.4% | 1621678 | 1507985 | 7.5% | 1,794,972 | 1,621,678 | 1507985 | 7.5% |
| CHINA | 2436707 | 2110765 | 15.4% | 23689302 | 21875132 | 8.3% | 25,631,196 | 23,689,302 | 21875132 | 8.3% |
| BRAZIL / ARGENTINA | 380942 | 381805 | -0.2% | 3972534 | 4478532 | -11.3% | 4,293,983 | 3,972,534 | 4478532 | -11.3% |
| OTHER | 1383840 | 1357017 | 2.0% | 15989264 | 15968025 | 0.1% | 16,160,755 | 15,989,264 | 15968025 | 0.1% |
| Notes: The percentage change in the final column compares the average selling rate in the year-to-date with the last full year. Late reporting countries and estimates are included in “Other”. Eastern Europe includes Turkey. China includes estimate of light vehicle imports. | ||||||||||
