Fasten your seat belts, turbulence ahead. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.
J.D. Power and Associates, the trusted authority when it comes to unbiased worldwide automotive data, has released their forecast for worldwide 2008 auto sales. Bottom line: It will be bloody.
The slowdown will affect all corners of the planet. Not all corners will see equally rotten sales. Mature and saturated markets will be hit hardest as consumers put their appetite for new cars on a diet. Emerging markets with room to grow will continue to grow – but grow no longer at double digit rates. The all-around winner will be after-sales.
Will emerge stronger: China. The booming Chinese light vehicle market (which includes passenger vehicle and light commercial vehicle segments) will slow in 2008, yet, it will still grow at very attractive rates. J.D. Power thinks Chinese light vehicle sales will come in at 8.9 million units in 2008. This would represent an increase of 9.7 % compared to 2007. That number will be more subdued than the 24.1 % growth achieved in China in 2007. But many U.S. and European auto executives would sell their first-born for these growth rates. (Side note: The Indian light vehicle market will remain tepid. 1.8 million units are expected to change hands in 2008, nearly the same as in 2007. India has approximately the same population as China, making 1.8 million units pretty much a non-event when measured on a global scale.)
Down, but not out: Europe. Light-vehicle sales in Europe as a whole are seen to fall to 21.3 million units in 2008. This would be a rather mild decline, 3.1 % compared to 2007. For the more saturated Western Europe market, J.D. Power projects a contraction to 15.6 million units sold, which would be 7.5 % less than 2007. Eastern Europe will still see growth. Eastern European unit sales should be around 5.8 million in 2008, an amazing (in light of the circumstances) jump of 11.3 % compared to 2007. However, like in China, growth in Eastern Europe is expected to slow.
Near death experience: U.S. J.D. Power and Associates forecasts total U.S. new light-vehicle sales to go down in flames, ending 2008 with just 13.6 million units sold. That would be a 16 % fall from the 16.1 million units sold in 2007. For 2009, J.D. Power and Associates sees even lower numbers. J.D. Power cautions that these numbers may come in worse, depending on how miserable the 4th quarter of 2008 will be.
Bottom line: J.D. Power doesn’t think that the world markets be back to their old glory anytime soon. Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates, said that “any truly pronounced recovery appears to be more than 18 months away.” And before it gets better, it likely will get worse : “While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse,” Schuster said. “While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil.”
No crisis for after-sales. J.D. Power observed that “approximately two-thirds of the decline in retail sales can be attributed to consumers delaying vehicle purchases.” People are keeping their vehicles longer. Keeping their vehicles longer means more parts and labor are needed to keep the vehicles running. Buying a new car or even a used car can be delayed. But if the brakes fail, it’s either having the brakes fixed, or walk. One of the few recession proof segments in this collapsing economy appear to be parts and services.
Author: Bertel SchmittThis author has published 8 articles so far.