Ambitious automotive sales forecast: will it hold up?
Many people know that the US auto industry is capable of building 16 to 18 million cars annually. They may also know that China’s car buying market is now larger than the US and has been that way since the last recession. Together, the two markets compose a significant number of the 85 million passenger vehicles that are expected to be built this year around the globe.
China Leads the Way
Further worldwide growth is anticipated with IHS Automotive forecasting an additional boost of 21 million units through 2021. According to projections, China should account for more than half that increase. Additional growth is expected in Europe and in North America, but production is expected to drop in South Korea and Japan as manufacturers spread production globally.
IHS’ findings were released in advance of a Berlin automotive forum that it is hosting beginning today and runs through Wednesday. This forum will analyze national, regional and global markets, deciphering trends and discussing sales projections.
For instance, European demand is expected to shift eastward although the IHS says that growth in Russia and Turkey will fall to about 1 percent this year. At present, western Europe accounts for 70 percent of European new car demand, but that will fall to 50 percent by 2021.
Shifting European Demand
European production is expected to rise four percent annually beginning next year and continuing through 2017 as exports to the United States and China help fuel that demand. Demand in Italy and Spain is also expected to rise as those nations continue to recover from the last recession.
“European car makers will meet divergent demand environments, depending on which part of Europe they are more exposed to,” said Denis Schemoul, manager Europe vehicle production forecasting, IHS Automotive. Schemoul, along with Mark Fulthorpe, director of global vehicle production forecasting at IHS Automotive will conduct a joint presentation on Tuesday. About the shifting market Fulthrope noted that emerging markets are impacting segment demand while mature markets are downsizing.
What Car Manufacturers are Forecasting
Car manufacturers have been releasing rosy sales projections in recent months in anticipation of further growth. Fiat Chrysler devoted an entire day last week to outline its growth strategy, projecting a 60 percent sales increase through 2018. Subaru has forecast a 20 percent sales increase through 2020 with US sales outstripping combined demand elsewhere.
To meet demand, new factories are cropping up around the world and existing plants are being refurbished and expanded. Even so, manufacturing plants are being closed in Australia as automakers respond to the high cost of production there. Similarly, OEMs in Japan and South Korea are also cutting back, while increasing production in markets where growth is strong.
Car manufacturers have long made projections for where they would like to see their businesses in five or 10 years, even longer.
In 2008, the Volkswagen Group publicly outlined Strategy 2018, an effort designed to move the German automaker into the No. 1 sales position worldwide. As of 2013, VW still trailed Toyota and GM, but it has been closing the gap through by boosting sales in China and through expanding production of its highly profitable brands, including Porsche and Audi. Even so, Volkswagens competitors are not rolling over, with each one also fighting for a larger slice of an expanding sales pie.