Development of Global Markets
For the German automotive industry, 2014 was a year of mixed sentiments. Optimism prevailed at the beginning of the year – for macroeconomic growth and the motor industry alike. The German market was on the starting blocks after a weak 2013 and the auguries also seemed favorable for Western Europe after years of decline. But it was also clear that the emerging countries – with the exception of China – would have to cope with a difficult year. The positive outlook for the USA and China, on the other hand, continued unabated. However, optimism gave way to disenchantment midway through the year – especially in Europe. The emerging countries’ economies were in the doldrums, the political crisis in Russia and Ukraine was causing economic and consumer uncertainty throughout Europe. If therefore the first half of this year was characterized by positive exaggeration, the mood went into reverse for the rest of the year and gave way to a similarly exaggerated and unjustified economic pessimism. The forward-looking indicators of sentiment slackened, research institutes’, and international organizations’, forecasts were capped.
The actual figures again showed a more realistic picture: the Western European passenger car market achieved its forecast level for 2014. Admittedly this was primarily because of the strong British market and not because of the hoped-for but absent recovery in France and Italy.
China: Consolidation of pole Position for passenger cars
The Chinese motor industry continued to motor along nicely in 2014: almost 18.4 million new cars were sold last year in the People’s Republic – China’s passenger car market thereby defied the flagging dynamism of the domestic market, confidently asserting its position as the world’s largest single market. Against the backdrop of increasing urbanization and the concomitant increasing demand in the so-called tier 3 and tier 4 cities, passenger car sales in the year as a whole grew by almost 13 percent.
Admittedly the market in 2014 is likely to have been driven not least by preemptive effects: owing to the severe air pollution caused primarily by high traffic volumes, a restrictive new registration policy is now in force in China’s major conurbations. Last year, Shanghai, Beijing, Guangzhou and Hangzhou were among the cities significantly clamping down on the number of passenger cars on their roads. Other major cities and provincial capitals followed suit and announced restrictions on new registrations, which clearly resulted in new vehicle purchases being brought forward.
Motor manufacturers will probably increasingly target China’s growing middle class – coupled with what is still a low level of motorization (there were just 61 passenger cars per thousand inhabitants in China at the beginning of 2015), this should ensure continued expansion of the Chinese passenger car market.
Breakneck growth rates, as for example in the record year 2013 (+23 percent), are likely however to be a thing of the past.
US market: Locomotive in the global market
The US market, along with China, was again among the growth locomotives driving the global motor industry in 2014: light-vehicle sales grew by around 6 percent, or 16.4 million units, thereby almost attaining the pre-crisis level of 2006. In the process, the market almost completed its catching-up process in 2014. This positive performance was sustained by the emphatic development of the economic environment. Admittedly, the first quarter did suffer from extreme winter weather, causing an annualized 2.1 percent dip in GDP. However, GDP growth in the rest of the year (Q2: +4.6 percent, Q3: +5.0 percent, Q4: +2.2 percent) more than made up for the downturn. Employment increased significantly over the year. The unemployment rate fell by one percentage point to 5.6 percent. Consumer confidence improved accordingly as did the asset situation, which was additionally boosted by a further recovery of the real estate market. The sharp fall in the price of gasoline operated as an additional “turbo,” especially in the last two months of 2014. At US$2.54 per gallon at the end of the year it was significantly below the 3 dollar mark.
Not least because of the lower fuel prices, new car purchasers’ motto in 2014 was again “bigger is better.” Whereas passenger car sales only rose by a good 1 percent to 7.7 million new vehicles, the market volume in the light truck segment increased by 10 percent to 8.7 million units. This boosted the share of the total market accounted for by light trucks from 51.2 percent to 53.2 percent.
In 2014, German manufacturers doubled their sales volumes compared with 2010. With sales of just under 1.4 million new vehicles, they posted a new record, even if overall they were unable to take full advantage of the upward trend in the US market.
On the other hand, German manufacturers made significant gains in the sale of electric vehicles (purely battery-powered and plug-in hybrids). With sales of 11,300 units, they increased their sales volume tenfold, achieving a market share of around 10 percent. In 2014, the total electric vehicle market broke through the 100,000 mark for the first time. With growth of almost 23 percent, electric vehicle sales increased to 119,100 units. The proportion of pure battery electric vehicles (BEV) accounted for fully 53 percent of this. A total of 0.7 percent of light vehicles featured an electric motor (1.5 percent of all passenger cars). The continued electric advance negatively impacted hybrid vehicles (without plug-in). The increased demand for plug-in hybrids resulted in a fall in conventional hybrid market share to 2.8 percent (year before: 3.1 percent). Notwithstanding the significantly higher price of diesel fuel, however, compression ignition vehicles gained market share. In 2014, around 3.1 percent of light vehicles were diesel-driven. Total sales increased by almost 17 percent.
Mercosur: Disappointing year - in all areas
Light vehicle sales in two of Latin America’s most important economies were hard hit in 2014: the Mercosur member states Argentina and Brazil only managed to sell a total of not quite 4 million new vehicles – a fall of almost 13 percent. Currency depreciation, inflation and falling real incomes hit Argentina especially hard: last year the Argentinean market for passenger cars and light trucks slumped by more than 36 percent. The luxury tax on premium vehicles introduced by the Argentinean government, and which came into force in January 2014, will probably have played no small part in the falling sales figures. The Argentinean consumers’ willingness to purchase also fell against the backdrop of a constantly deteriorating economic environment. Even the “Pro.Cre.Auto” incentive program, offering preferential interest rates for the purchase of locally manufactured vehicle models to the end of the year, was unable to slow the downturn – with light vehicle sales of around 589,000, 2014 handed Argentina the weakest market since the crisis year 2009.
The Brazilian light vehicle market was also a disappointment in 2014: a macroeconomic environment troubled by inflationary pressure, the weak Real and a restrictive monetary policy offered passenger car and light truck sales almost no scope for recovery. With sales of 3.3 million units, the market shrank by almost 7 percent for the year as a whole – raising the industrial product tax IPI at the beginning of the year proved to be not the only obstacle here; there was also the hike in new vehicle prices as a result of the obligatory fitting of airbags and ABS.
In the long term, however, Brazil remains a growth market – following the re-election of President Dilma Roussef last October, the country is waiting for the necessary impetus to reform to get one of the world’s great economies back on track. If the economic engine should start firing again and consumer confidence improve, then light vehicle sales will probably benefit as well.
India: Turnaround by midyear?
After the disappointment of the year before, the engine of India’s motor industry started firing again in 2014 – Indian passenger car sales last year were around 2.6 million. If the first quarter (-6 percent) had initially clearly suffered from a combination of weak economic growth, high interest rates and strong inflationary pressure, starting in May the Indian passenger car market managed to turn things around. Not least because of the outcome of the parliamentary elections held in the early summer – Indian consumer sentiment has brightened notably since Premier Narendra Modi took office – new vehicle sales finished with a plus in each of both the second as well as the third and fourth quarters of 2014.
To boost domestic vehicle sales, the government also lowered excise duty on passenger cars and commercial vehicles as early as February. Against the backdrop of falling fuel prices, this offered – especially in the second half of the year – further scope for recovery: India’s passenger car market managed growth of almost 1 percent for the year as a whole.