The June slowdown in new vehicle retail sales in the US, coupled with increasing uncertainty within the European automotive market, indicates that recovery in established automotive markets may be flagging, according to analysis by JD Power.
The market research firm also notes that sales growth in emerging markets – particularly Brazil, Russia, India and China – will become increasingly important to sustaining global recovery.
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During the second half of 2010, JD Power projects that China will grow its lead as the world’s largest vehicle market, even though sales in the country have slowed to a low double-digit rate of growth in 2010, from growth averaging 50% in 2009.
“The centre of the automotive universe is shifting quite rapidly away from the established markets of North America and Europe,” said John Humphrey, senior VP of global automotive operations at JD Power.
North America light vehicle market up, but well under pre-crisis level
JD Power forecasts North America light vehicle sales for 2010 will come in at 14.2m units, a 12% increase from 2009, but still 25% below 2007 levels.
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By GlobalDataDespite slowing growth between May and June, new vehicle retail sales in the US have improved year-on-year to a seasonally adjusted annualised rate (SAAR) of 11.0m units in June 2010, up from 9.7m units in June 2009. US retail sales are projected by JD Power to total 11.8m units for 2010 – an increase of 13% from 2009.
However, the firm warns that due to the ‘increasing likelihood of a slower recovery’, there remains the possibility that final sales totals for 2010 could come in 200,000 units below current projections. And despite this projected year-over-year improvement, sales are still down by 25 percent from pre-recessionary levels.
Within North America, Mexico is forecast to show the largest year-over-year gain, with a 14% increase in 2010, compared with 2009. However, new vehicle sales are forecast to come in at 860,000 units – well below the market’s peak of 1.1m units in 2007. New light vehicle sales in Canada, which have managed to escape heavy negative impact from the recession, are projected to increase by 5% on 2009’s level, to total 1.53m units in 2010.
Europe in post-scrappage downturn
New vehicle sales in the European vehicle market, where payback from robust scrappage programs and various countries’ debt crises have derailed recovery, are forecast by JD Power to decline by 5% percent from 2009, to 17.2m units. Leading the declines from 2009 within the major Western European markets are Germany (down by 20%), the UK (down by 7%) and Italy (down by 5%.)
Asia Pacific seeing growth
In contrast to the outlook for Europe, automotive sales in Japan appear more promising, with sales forecast to increase by 11% in 2010. Vehicle sales in Japan are projected to come in at 5m units in 2010, still a fraction of the once-powerful market’s peak sales of nearly 8m units in 1990.
“It is the Asia Pacific automotive market that is turning into the global powerhouse,” said Humphrey. “Sales in the region are forecasted to grow by 16% year over year, to end 2010 at 27.9m units. China is doing the heavy lifting, even though there are signs that growth in the China market is slowing slightly.”
Brazil, Russia, India and China (BRIC) markets
According to Humphrey, while the projected 20% growth for China in 2010 might seem low – considering that during its peak growth period, sales rates once approached triple-digit figures -sales volume is still projected to reach 15.6m units for 2010. This would once again position China as the world’s largest vehicle market, with sales more than 3m units higher than that of the U.S.
While China new-vehicle sales should account for more than the rest of the BRIC markets combined, the other key emerging economies are helping to sustain the global automotive recovery. Brazil, which has been experiencing solid economic growth, is projected to reach sales of 3.3m units in 2010, an increase of 8% from 2009.
India is currently experiencing production growth at a rate similar to that experienced by Brazil one decade ago, with numerous manufacturers establishing themselves singly or as part of joint ventures. According to Humphrey, while there are still significant infrastructural and political challenges that may prevent India from experiencing the same sort of explosive growth seen in China, it has the potential for high rates of growth in the coming years. New vehicle sales volume in India is projected to reach 2.5m units in 2010, a 19% increase from 2009.
Although new vehicle sales in Russia halved in 2009 to end the year at just 1.5m units, the market is showing signs of modest recovery, with light vehicle sales forecast to reach 1.6m in 2010. However, according to JD Power, new vehicle sales in Russia will likely not achieve the peak levels seen in 2008 until 2014.
“Deterioration in consumer confidence on the heels of a significant rate of GDP decline, combined with tightening credit, led to a massive decline in the Russia automotive market,” said Jeff Schuster, executive director of global forecasting at JD Power.
“Although it remains the most fragile and tenuous economy of the four BRIC nations, Russia has a distinct advantage over the other emerging markets – deep reserves of oil that fuel its economy in better years. In contrast, China and Brazil, in particular, remain vulnerable to global fuel uncertainties and are continuing efforts to turn to alternative energy sources, notably in their transportation bases.”
Hybrids ‘going mainstream’
JD Power says that the global hybrid market is quickly transitioning from niche to mainstream, with global hybrid-vehicle sales projected to reach 910,000 units in 2010, a year-over-year increase of 25%. In 2015, hybrid vehicles are expected to come in at 2.3m units, and to comprise 4% of global light-vehicle sales.
In the second half of 2010, JD Power notes, several manufacturers will launch new battery-electric models across the globe, such as the Nissan Leaf and Ford Transit Connect, as well as plug-in electric models, such as the Chevrolet Volt. The launch of these models is expected to double sales of electric-powered vehicles to 24,000 units worldwide in 2010. In 2015, sales of electric vehicles are expected to total 500,000 units globally.
