The beginning of a significant revival will start in 2011. Global sales of new light vehicles are forecast to reach ~60.8 million units, an 11% increase over 2010. This will finally bring the global industry back to 2008 demand levels at least. However, in comparison with 2007 when times were good, large volume gaps will still appear in various countries.
This list is led by India with a growth of 45% by 2011 over 2007, followed by China (39%), Brazil (26%), South Korea (6%) and Australia (2%). All other key markets will not be able to reach their 2007 results by 2011 as their recoveries will take longer. The countries furthest from recovery are Spain (-46%), Russia (-32%) and the UK (-23%) compared to 2007. These three markets were hit the hardest by the global economic crisis and are not forecast to be back on track before the 2014-2015 time frame. Russia especially, one of the former high potential markets, was hit very hard and will take several years to recover.
2009 will always be remembered in the automotive world as one of the darkest years for the industry. It was a reality check for everybody inside and outside of the industry. The strategy of adding capacity first, and thus bringing buyers to the market, was brought to an abrupt halt. Severe structural and organizational changes within the industry will only be some of the results of the crisis in 2009.
Halfway through 2009 we are starting to see some stabilization. The industry has reached a plateau at low levels and the freefall of the past month has slowed significantly. The shock seems to have loosened up and OEMs as well as suppliers are starting to look forward again. As planning phases for 2010 start in most companies in the early fall, market intelligence and solid long-term forecasts have become much more important again.
Capacity adjustment to the new market conditions and a pick-up of demand in key sales markets will be key to the revival of the automotive industry. Identification of those markets and channeling resources efficiently will play a crucial role in how OEMs emerge from this crisis.
The global new light vehicle sales demand in 2009 will come in at around 52.7 million units, which is about 9 million units less than vehicles sold in 2008. For 2010 CSM expects a global growth of about 3.6%, resulting in 54.6 million units. This remains far below 2008 volume for two key reasons.
First, a time delay exists between a market coming out of a recession and changes in employment. Though industrial production is rising, it normally takes six to nine months before we see the effects on the labor market. Consumer confidence may rise quickly; however, customers will still be hesitant to make big-ticket purchases at first.
The second reason relates to government incentives or scrappage schemes. Various countries launched incentive campaigns in 2009 to stabilize market demand and support the automotive industry. Those schemes generated a pull-ahead for 2010 volumes; these volumes will be missing next year and, in some cases, even the year after.
For example, in Germany there are public predictions that 2.5 to 2.7 million passenger cars will be sold in 2010. This would mean that Germany is facing pre-reunification volumes at 1990 levels. CSM does not share that extreme public pessimism but certainly volumes in the German market will be much lower than in 2009. CSM forecasts a total light vehicle sales volume of a little under three million units.
Over the next two years, the global markets will generate additional sales volume of 8.1 million units, of which 1.9 million units will be generated in 2010 and 6.3 million units will be generated in 2011. The volume decrease of the last two years will need about three years to level out again.
Henner Lehne may be reached at hennerlehne@csmauto.com.
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