For some years it has been an article of faith among many, and increasingly the general public, that the world is awash with vehicles and it is impossible for the planet to support any further increase in motorisation. But this is a false prospectus. Without wishing to diminish the concerns of those who are deeply concerned about the future of the planet, some simple facts always confound the view of people whose lives are constrained by traffic jams and see the world through local conditions.
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The simple statistic that, in the year 2000, half of all vehicles in the world were located in just three countries – the USA, Japan and Germany – was often simply not believed. The even more staggering numbers – that 75% of all vehicle activity occurred in countries with just 16% of the global population – and that most people in the world had virtually no access to motorisation, and which fact was one of the root causes of poverty, malnutrition and premature death in the developing world, always caused a moment or two of reflection.
Our latest report, “Managing the Future: Global Automotive Megatrends to 2030”, has been created as a direct consequence of discussions over the years, both private and business, to provide a picture of the dynamics of an industry that is fundamental to the future of mankind. One of the most important features of the report is that a substantial portion covers a time period of no less than 100 years, from 1930 to 2030, with the rest of the report covering a 70-year span from 1960 to 2030. The reason for the difference in time scale is that it is not possible to create such a detailed picture for the period from 1930 to 1960 as it is for the period from 1960.
The purpose of covering such a long time scale is that many people, often well informed, look at the future of the industry through the prism of a snapshot of the present. It is important to show how the industry has developed over the years so that predictions for the period to 2030 can be shown against the solid background of what has gone before.
The motor industry has expanded more or less continuously since 1930, interrupted only during World War ІІ. Following the war, factories were given over mainly to the production of consumer goods, not least the motor vehicle. Growth of the motor industry in what was then the western world was rapid and dramatic, and with its expansion came employment and increasing national and personal income. This virtuous circle fed on itself and lifted the western world quickly to abundant levels of economic and social well-being. However, this well being did not extend to the non-western world for many years.
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By GlobalDataIn 1960, Japan started to build motor vehicles at an astonishing rate, producing vehicles based on western designs. Japan very quickly came to dominate the world industry, causing disruption among the western companies that had until then dominated the global auto scene. The Japanese invasion caused tariffs and quotas to be installed against the flood of vehicles coming from over the ocean. These quotas were not without some justification, as the non-tariff barriers to trade in Japan were almost impossible to overcome and are still reflected in the modest proportion of the Japanese market that is taken by non-Japanese manufacturers.
There are those who believe that the Japanese onslaught was the wake up call that was needed for the American and European manufacturers that effectively controlled the industry, as it forced the existing industry structure to renew itself and to improve the quality, reliability and value of the vehicles it produced in the face of such intense competition. I must admit to some sympathy with this view.
Whatever the prevailing view, the presence of the Japanese manufacturers changed the international automotive outlook forever, and was instrumental in allowing the rate of global motorisation to expand dramatically. The “triad” of automotive manufacturing locations – North America, Western Europe and Japan – has now been in place for about four decades and has dominated the world scene throughout that entire period. However, immense changes are occurring that will have as much of an effect on the future of the industry as did the emergence of Japan as a major vehicle producer all those years ago. The changes are likely to continue as the companies producing in China and India, and are increasingly producing in Central and Eastern Europe, will largely be based on the technology of the existing world structure and its finance. Another major difference is that it now appropriate to include the South Korean industry – which itself was built on Western technology – in the pantheon of global manufacturers.
The success of the industry thus far has allowed motorisation and social and economic development to soar throughout most of the developed world, and has started to make progress in parts of the developing world. Even so, there are vast differences between the two major regions, the MDCs (More Developed Countries, consisting of W Europe, N America, including Mexico, Australia, Japan and New Zealand) and the DVCs, (Developing Countries, all those countries not in the MDC grouping). In 2000, the average world level of vehicle ownership was 125 vehicles per 1,000 population. In the MDCs, however, the figure was 585 per 1,000 and in the DVCs, 41 per 1,000
The imbalance is now being addressed, and rapidly. Growth in the developing world is occurring at an almost unbelievable rate, not least because governments with populations measured in billions need to provide a ladder of opportunity for ambitious citizens. The result of failure will undoubtedly be significant social unrest. It is only necessary to look to Russia and Central Europe to see what can happen when people power takes over.
“Managing the Future: Global Automotive Megatrends to 2030” therefore seeks to draw the continuing picture of the past, present and future of the motor industry and to put the enormous growth forecast for it into a robust setting based on experiences to date and realistic foundations for the future.
The numbers are dramatic: an assessed 1.82 billion vehicles were produced and sold from 1960 to 2005 inclusive. The forecast for the 25-year inclusive period 2006 to 2030 is that 2.61 billion units will be produced and sold around the world, with the majority of new growth occurring in the developing world. This means that the number of vehicles to be built and sold in 2030 rises to 145 million units a year, compared with 60 million units in 2000. As a result, the number of vehicles on the roads of the world increase to 1.482 billion – yes billion – compared to 770 million in 2000, and that is after a major increase in the volume of vehicles being scrapped. Even allowing for the advance in vehicle sales and the growth in the number of vehicles on the road, ownership in the DVCs in 2030 only increases to 112 vehicles per 1,000 population, still only one-fifth of that in the MDCs 30 years’ earlier in the year 2000.
The reason that this huge growth results in such a modest increase in ownership, despite the large increase in sales, is due the remarkable expansion in population predicted for the developing world. In 2030, the DVC region will account for 88% of all the people on the planet, or 7.4 billion out of a world total of 8.45 billion. This compares with a total world population of 6.1 billion in the year 2000. Therefore the global population increases by 2.35 billion, or 38% between 2000 and 2030, with the vast majority of the additional people born being in the developing world, all of whom will require feeding, nourishment, healthcare and access to employment. This will be truly a major challenge, and one that will depend on motorisation as one of the tools of its reconciliation.
But it is not only the number of vehicles to be produced that provides a formidable challenge – the finance also has to be found to allow the industry to invest to produce and sell the vehicles at prices that are affordable to the customer. Trying to forecast investment in a world of rapidly fluctuating exchange rates and changing currencies is never easy, but forecasting in US dollars at today’s prices allows an order of magnitude to be assessed. Cumulative revenue from vehicle sales for the period from 2001 to 2030 inclusive is assessed at no less than $US 51.2 trillion, with an additional $US12.8 trillion for the aftermarket.
The sales revenue figures have to cover all the investment needed for plant and facilities, and sales and distribution network, they have to cover the components stream and a profit margin as well. This will all occur at a time when the industry is becoming ever more competitive, the vehicles sold in the developing world will be generally smaller, and the industry has to contend with ever growing numbers of scrap vehicles. But, importantly, a saving of even 1% in the cost of building and selling motor vehicles can yield worthwhile results, in fact $US 51.2 billion, in the sales element of this forecast alone.
The challenges are there. Is it possible to meet them? It seems essential that long-term strategies need to be considered even more deeply than usual given the scenario presented here. “Managing the Future: Global Automotive Megatrends to 2030” is designed to provide that long-term view and as an aide to all those involved with the future of their companies and industries or those associated with the industry.
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