Global auto industry pins best hope on China


SHENZHEN, China: At a time when Indian, Russian and Brazilian car markets are stumbling, China remains the major growth engine for the global automotive industry, analysts said.

“For many years it’s been the Bric nations [Brazil, Russia, India and China] which have accounted for the growth of global sales, taking over from the more mature markets,” explained Carlos da Silva, an analyst at IHS Automotive.

But not all four Bric countries are expected to see their car markets grow at the same rate. Some are already declining.

Sales of new cars in Russia, for instance, are expected to fall by around 7 percent this year to 2.7 million vehicles, predicts IHS Automotive. In India—hit by a triple whammy of high interest rates, a sharp economic slowdown and rising fuel costs—car sales are expected to contract for the second year in a row after a decade of uninterrupted growth. Sales in Brazil are expected to remain stable at around 3.6 million cars, according to IHS.

Global automobile sales should still grow by 3 percent this year, according to the Paris-based International Organization of Motor Vehicle Manufacturers (OICA), a trade body representing car manufacturers.

But it is in China where analysts see the real growth potential. Despite the current slowdown in the Chinese economy, sales should continue to rise, analysts predict.

PwC expects the sale of new cars in China to double between 2012 and 2019, which would make the automobile market there “roughly the equivalent to both the European and the US combined.” This continued buoyancy is partly down to the fact that “Chinese households have little debt,” and that the minimum wage has increased on average by around 20 percent, said Julien Marcilly, head of country risk at credit insurer Coface.

In contrast, he said; “Brazil’s economic growth has mainly been driven by strong household consumption via easy credit access, which is not sustainable in the medium term.”

The Russian car market, meanwhile, has seesawed, plunging 49 percent in 2009, rebounding and then declining once more. The decline in car sales also coincides with a sharp slowing of the Russian economy—only 1.4 percent in the first half of this year, compared to 3.4 percent during 2012. Local authorities there are hoping to boost new sales by easing access to credit.

However, European manufacturers who have invested in factories inside Russia still believe in the potential of the market there, which could become the second-largest in Europe by 2020 after Germany. At the same time, the medium-term outlook for the global automobile market remains good throughout the Bric countries.

“More and more people have the desire to own, and for the first time can afford, a new car,” PwC concluded.



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