¹ Video Tip
For our brief video introduction to the Automobile industry, see www.plunkettresearch.com/video/automobile.
The automobile industry surged ahead worldwide in 2013 and 2014, with the notable exception of Europe, where a dull economy has been particularly hard on auto sales.
Estimates of the global automobile market vary substantially from one source to another.
Analysts at IHS Automotive estimated the global market at 82.8 million units for 2013, up about 4.2% from the previous year.
According to Plunkett Research estimates, U.S.
car and light truck sales will total from 16.3 million to 16.7 million units for 2014 provided the economy does not slow significantly during the final quarter of the year.
This would represent excellent growth from 15.6 million units sold in 2013, 14.5 million during 2012 and 13 million units during 2011.
The biggest upward trend in auto sales has been in China.
While estimates of its annual unit sales vary widely, China has clearly become the world’s largest car market, topping 20 million units sold during 2013.
China’s sales could grow to 22 to 24 million in 2014 and 30 million by 2020, depending on economic growth, the availability of credit and the regulatory environment.
Meanwhile, China’s government has a great deal of control over the market, as, at any time, it may increase sales by encouraging new auto loans, or decrease sales by adding new registration
The automobile industry surged ahead worldwide in 2013 and 2014, with the notable exception of Europe, where a dull economy has been particularly hard on auto sales. Estimates of the global automobile market vary substantially from one source to another. Analysts at IHS Automotive estimated the global market at 82.8 million units for 2013, up about 4.2% from the previous year.
According to Plunkett Research estimates, U.S. car and light truck sales will total from 16.3 million to 16.7 million units for 2014 provided the economy does not slow significantly during the final quarter of the year. This would represent excellent growth from 15.6 million units sold in 2013, 14.5 million during 2012 and 13 million units during 2011.
The biggest upward trend in auto sales has been in China. While estimates of its annual unit sales vary widely, China has clearly become the world’s largest car market, topping 20 million units sold during 2013. China’s sales could grow to 22 to 24 million in 2014 and 30 million by 2020, depending on economic growth, the availability of credit and the regulatory environment. Meanwhile, China’s government has a great deal of control over the market, as, at any time, it may increase sales by encouraging new auto loans, or decrease sales by adding new registration fees or restricting traffic in major cities in order to reduce congestion and pollution.
One of the biggest winners by far in today’s highly competitive automobile market has been Korea, where Hyundai, along with its brand Kia, have enjoyed soaring global sales. Consumers are attracted to their reasonable prices, excellent warranties and world class manufacturing quality.
Approximate Global Car/Light Truck Sales by Top Manufacturers 2013, in millions
General Motors (GM) 9.72
*Fiscal year ending March 31, 2014
There are approximately 250 million vehicles in operation in the United States. Around the world, there were about 1.1 billion cars and light trucks on the road in 2014, a number that is growing by roughly 40 to 50 million yearly.
All major car makers are aggressively pushing their smaller, high efficiency vehicles due to both high gasoline prices and government mandates that auto manufacturers meet high average miles-per-gallon rules. At the same time, engineers are pushing technological changes in their larger cars and trucks in order to enhance their fuel efficiency. GM is betting heavily on its Chevrolet Cruze, a small sedan capable of 36 miles per gallon (mpg) on the highway and stuffed with convenience features that consumers appreciate. Ford’s revamped Fusion earned rave reviews, and it comes in either a hybrid model or a standard engine version that gets 31 mpg on the highway. Chrysler is relying heavily on its relationship with Fiat for new, fuel efficient models. Honda, Volkswagen, Toyota, Hyundai, Nissan and Peugeot all have invested in new, advanced small cars. All major luxury brands like Mercedes, BMW, Lexus and Audi have relatively small cars on the market and will steadily introduce a wide range of fuel efficient designs. BMW introduced its iSeries high efficiency cars in 2013, including a three-cylinder engine that is part of a new plug-in hybrid.
One result of relatively high gasoline costs and frugal consumers has been strong demand for Toyota’s Prius gasoline-electric hybrid car. The company has made investments that enable it to manufacture hybrid versions of many of its popular models, including the Camry and several models of the Lexus. Hybrids are now available from a wide variety of makers, and technology has steadily improved. Nonetheless, hybrids remain a very small fraction of the overall car and truck market due to their relatively high initial costs.
One of the most disappointing launches has been GM’s Volt, which debuted in very low production volume as a 2011 model. This car includes a gasoline-powered engine capable of charging its batteries for those occasions when it is not convenient to plug in, as well as providing a boost to acceleration when needed. Nissan offers competition in the electric vehicle sector with its all-electric model called Leaf, which enjoyed strong sales growth during 2013. The high prices and limited range of batteries will cause many consumers to stay away from electric cars. An exception is Tesla, the U.S.-based maker of luxury, fully electric cars. Tesla’s current models are expensive, but they offer long range due to their unique battery strategy. Overall, however, the electric car market is likely to begin good growth when advanced, long-range batteries become available at much lower cost, which may take until 2020 or so. Many of the world’s top research organizations are working steadily on this challenge.
Both consumers and emissions regulators are taking a renewed interest in clean diesel engines, like those offered in new cars from BMW, Volkswagen and Mercedes-Benz, which offer exceptional performance and fuel economy while providing quiet, vibration-free running similar to that found in gasoline-powered cars. Clean diesel offers a particularly attractive alternative to hybrid technology for those who seek fuel efficiency, and it is already widely used in passenger vehicles in Europe. Meanwhile, the use of ethanol as a gasoline additive in America has grown rapidly, whether or not it makes any environmental or economic sense, thanks to requirements enacted by Congress.
Consumers are keenly interested in quality and serviceability in the cars that they acquire. A stumble in this regard can have devastating consequences for a car maker, as seen in Toyota’s 2009-10 quality problems that led to slow sales, massive recalls and a humble apology from the firm’s leader.
The rising affluence of consumers in China is creating both huge opportunities and major problems. China has become the world’s largest user of energy overall and one of the world’s largest importers of petroleum products, primarily to fuel its burgeoning fleet of cars and trucks. Streets and highways are clogged with vehicles, to the extent that traffic and smog are nightmarish. Automakers from abroad have raced to establish plants and partnerships in China. Today, strong markets have emerged there for everything from inexpensive sedans and vans to Cadillacs and German luxury cars.
India has also seen significant growth in its automotive sector in recent years. However, high fuel prices, relatively high inflation and other factors depressed sales during 2013, as total units sold dropped an estimated 9.59% to 1.8 million.
Not to be overlooked are the vast changes taking place in automobile manufacturing plants. Flexible factories have reduced man-hours and cut costs per car, while offering a much wider range of choices for customization by consumers. Today, more than ever, car manufacturers and their suppliers are cooperating in the design and manufacture of new cars in ways that are revolutionizing the entire process. Bankruptcies at GM and Chrysler in 2009 enabled these firms to shed debt, cut employees, renegotiate contracts and dramatically reduce operating costs.
Inexpensive cars manufactured in China are now on the market in many emerging nations. The question is not whether China will export cars and trucks, but whether consumers in advanced markets such as America will be convinced that they offer safety and reliability. Meanwhile, U.S. automakers have made intense demands on their component suppliers for lower prices—these suppliers are, in turn, looking to low-cost production in China and emerging nations.
European manufacturers are facing challenges of their own. High costs, tough labor laws and daunting government regulations are constant challenges to manufacturers there. Nonetheless, firms like Volkswagen and Daimler/Mercedes-Benz have found great success in the global market, often locating plants in nations where their products sell well. Volkswagen has its eye on becoming the world’s largest car firm. However, as of 2013-14, difficult economic conditions in Europe were leading to slow domestic sales for all European car makers, and manufacturers were struggling to reduce both costs and manufacturing capacity. The European Automobile Manufacturers’ Association reported that unit sales dropped by 1.7% in 2013, to 11.9 million vehicles.
The thought of the next billion automobile owners is either the most intriguing or the most terrifying vision for the near future, depending on how you look at it. Despite the recent woes of the automobile industry, future global demand for cars will far outstrip former peaks, creating immense business opportunities. While incomes are rising in the developing world, the price of entry-level automobiles is dropping. Car makers are rushing to introduce their own low-cost options for buyers in China, India and elsewhere.
In its report World Economic Outlook April 2008, the International Monetary Fund showed how, under one method of analysis, the number of cars in emerging and developing economies could increase by 1.9 billion from 2005 to 2050, bringing the world’s total to nearly 3 billion automobiles. Will this actually occur? The personal income needed to acquire the cars will be there, but many other questions loom: Will that many consumers find automobile ownership to be desirable? Will public transportation, car sharing systems, commuter trains and other alternatives to individual car ownership reduce demand for personal automobiles? Will fuel, whether gasoline, hydrogen or electricity, be affordable and readily available? Will roads, parking and other traffic infrastructure be adequate to support car ownership on this scale? The same massive inconveniences and costs of individual car ownership that face residents of extremely dense cities such as Tokyo and Manhattan today may dampen desire.
Car sharing plans have soared in popularity. Surveys show that many young adults have little interest in owning a car of their own, which is vastly different from the attitude that was held one generation earlier. Car sharing is such a growing trend that car rental giant Avis acquired Zipcar, a pioneer in this area. Even major auto makers, like BMW with its DriveNow program, are starting their own car sharing schemes, hoping to develop strategies that are well in tune with changing consumer trends.
Car safety has made dramatic progress in recent years, mainly by adopting technologies such as backup cameras, anti-skid, advanced brakes and collision avoidance systems. Now, virtually all major car makers are working intensely on technologies that will enable cars to essentially drive themselves. The year 2020 is often talked about as a launch date. Eventually, the end result will be vehicles that communicate with each other while utilizing advanced technologies to safely stay in lanes, regulate speeds and avoid other vehicles as well as pedestrians.
New traffic and safety technologies may smooth traffic flow, while highly efficient electric cars topped off by safer nuclear generation plants and concentrated solar plants may eventually turn fuel consumption and pollution into modest problems. In any event, it is reasonable to assume that the world’s economies will, over time, advance to the point that 3 billion people will desire, and be able to pay for, access to advanced transportation, whether or not that takes the form of individual automobile ownership or car sharing on a massive scale.