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| India Infoline Sector Reports | Thu, 11-Dec-2003 11:57:29 IST (GMT+5:30) | |
| Automobile - Cars | ||
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International Scenario Overview The modern day passenger car is a modern economy's draught animal, driving the growth of upstream industries like steel, iron, aluminum, rubber, plastics, glass, and electronics and down stream industries like advertising and marketing, transport and insurance. The car industry generates large amount of employment opportunities in the economy. For example in the US, every sixth worker is involved in the making of an automobile. The world car production has increased from 44.66mn in 1996 to an estimated 48.3mn cars in 1999. Japan, Canada and USA brought about the major increase, which contribute to 53% of the world's car production. The USA and Japan are the leaders with around 42% of the total world market. However, since the last two to three years, the international passenger car industry has been witnessing an over capacity of more than 30%. The trend suggests that industry volumes may grow by just 2% or around 10mn vehicles per year. If this situation continues for the next few years the world car market may witness shakeout in the near future. Already signs towards this are being observed as the phenomenon of mergers catches on. As per industry experts the number of major players in the world car market may come down from present level of 30 to 5 in next ten to fifteen years. The recent mergers in the international car market are Ford-Volvo, Renault-Nissan, Daimler-Chrysler. A few more players are expected to join the fray in the next few years so as to strengthen their hold in the world market. Among the top car manufacturing companies General Motors and Ford Motors group of USA lead with a contribution of 15.8% and 11.6%, of world car production, respectively. Volkswagen and Toyota stand third and fourth with more than 9% contribution each to the world car production. The details about major players in world car market and different car produced is given in Annexure 3. The largest car parks in the world United States The USA is the largest car market with a strength of around 150mn cars. Traditionally, the market has been dominated by GM and Ford. However, their dominance has recently been challenged by well-known Japanese brands like Toyota, Nissan and Honda whose combined market share is around 20.7% in January 2000. Most other brands have a nominal presence. Volkswagen, for eg, accounts for a minor 2% of the US market while others like Mercedes Benz and BMW constitute a combined share of around 2.1%. In CY99, sales of passenger cars grew by a healthy 6.9%yoy to 8,749,986 units reflecting the buoyant mood of the American economy. In fact, sales were the highest since the 8.99mn figure recorded in CY94. The market rose by some 566,701 units and, for some of the contenders in the field, there were some noteworthy gains. A number of importers recorded best-ever sales results, and the likes of Volkswagen and Audi were reporting sales which were at a twenty-year high. Some of the Japanese firms saw sales fall in what might seem a bull market, particularly Honda, Nissan, Toyota and Suzuki. But it was the performance of the likes of General Motors, Ford and Chrysler that brought the most cause for concern. Despite efforts of the 'Big 3' to give customer incentives in order to keep their showrooms busy, they recorded lackluster sales growth. In fact GM's market share dipped to 29.2% from 29.6% last year. Ford and Chrysler posted sales growth of only 2.9%yoy and 0.8%yoy. Therefore, some analysts have pointed out that the picture is not rosy as it seems for the industry. According to them, customers have preponed purchases to 1999 and in all likelihood sales may fall in 2000 and 2001. They are predicting that sales may touch 8.25mn in CY2000 and 7.84mn in CY01. Another important factor affecting car sales is the steady trend towards big, macho light trucks. In CY86, its last peak sales year, the US market bought 6.8mn more passenger cars than light trucks. In CY99, that gap dwindled to 450,000 units -- in spite of the fact that yoy car sales surged by 6.8%. Table 1: Passenger car registrations in the USA
Source: just-auto.com The search for something different has, perhaps, led to a situation where three of the top four models/brands are Japanese in origin. The best selling car in the USA is the Toyota 'Camry'. Camry sold 448,162 in CY99, a rise of 4.2%yoy from last year and has been able to maintain its position at the top. The Honda 'Accord' was in second place once again with 404,192 sold, just 0.8% more than the 401,071 of CY98. The top selling US model was third placed Ford 'Taurus', sales edging down by 0.7% to 368,327 from 371,074. Year 2000 started with sales of light vehicles continuing with the pace which was established in 1999. During the month, sales are up a healthy 10.1%yoy. The most surprising gain was in imported cars, up a stunning 34.7%, due largely to the success of products from Volkswagen, Toyota and Hyundai. The strong US economy has continued to benefit nearly every manufacturer and only Chrysler, Kia and Saab have reported lower sales over the same period a year ago. Table 2: Auto sales in the USA
Source: about.com Western Europe In CY99, car sales crossed the 15mn mark for the first time as depicted in the table below. The figures are estimated, in the sense that for several countries actual sales are taken into consideration for the first twenty days while for the rest of the 10 days, it is estimated. It can be so that the final tally is different from what is shown in the table. However, a clear indication has emerged that sales have started to peter down in the last two months of the year with it rising by only 0.3%yoy in December 1999. In December itself – as in November – there were nine countries which posted lower yoy sales. Germany clocked sales of 3,787,679 units, some 1.4% up on the 3,735,987 figure posted in CY98. However, sales were clearly tailing off towards the end of the year. The market was stimulated a little by the need for Mercedes-Benz to put a good face on the sales of the Smart small car, and by the race to the wire between the Volkswagen Golf and the GM Opel Astra. Italy is the second biggest market in Europe, and still remains the most important market for the Fiat Group, despite efforts to alter the position. The Italian car market dipped by 1.2% in CY99, to 2,349,200 units from 2,378,592 units, despite a mild surge in December. Analysts expect that unless the Italian Government chooses to reinstate scrappage incentives (as they have been encouraged to do by Fiat), the market will continue to slide during the next two years, although not to a great extent. The UK car market is expected to fall as the market has kept well ahead of the true demand in the last two years and a correction is expected in the next two years. The French market is also expected to settle down after a good showing in CY99 mainly brought about by higher sales from PSA and Renault. Table 3: Countrywide estimated sales in Western Europe
Source: just-auto.com The market of Western Europe is spread out more or less evenly among four big players who account for more than 40% of the market. The largest player is Volkswagen, which has market share of around 11.5%. GM and Renault come in next with a market share of around 11% each. They are followed by Ford, Peugeot, Fiat, and Mercedes Benz (all with market share of more than 5%). Toyota is the highest selling Japanese brand with a market share of 3.2%. For the latest update on the Western European market click here Japan The profile of the Japanese market is very different than those of the USA and Western Europe. What marks out the market is the tight import restrictions and a strict vehicle-testing regime followed there. This means that the scrappage rate of cars is very fast and cars are replaced after a five-year period. In 1999, the car market (in terms of registrations) grew by a modest 1.5%yoy as the industry reeled under recessionary conditions in the economy. Production grew by a marginal 0.5% largely due to lower production in Honda and Nissan's plants. Exports grew by 2%yoy largely due to Toyota's performance. In terms of market share, Toyota and Honda dominate the market with around 42% of the pie. Nissan and Suzuki come in next with a combined share of about 24%. Other major players include Daihatsu and Mitsubishi. Table 4: Production, sales and exports of Japanese auto companies
* - imports / Source: japanauto.com Imports of cars to Japan rose by 3%yoy till September 1999 as larger number of European built cars from DaimlerChrysler, BMW and Renault entered the country. Imports from the U.S. rose by 17.2% due to continuing increased shipments of U.S.built Hondas and Isuzus, while that of U.S.-built cars by DaimlerChrysler, Ford and GM declined. Small/mini car models (below 2000cc) still dominate the Japanese car market as is evident from the table below. Table 5: Imported and overall car sales in Japan
Source: japanauto.com Rest of Asia Toyota, Nissan, Honda and Mitsubishi have dominated the ASEAN market for the past ten years. In India, however, the story is different with Maruti in collaboration with Suzuki occupying 80% of the market till recently. These markets are diverse from the Japanese market in the sense that cars have much longer useful lives in the former (say about 20 years). In China, surprisingly, commercial vehicles and not cars are the people’s choice. The market has been very small at 3.5mn vehicles, which is dominated by Volkswagen and Daihatsu. The South Korean market is about 7.5mn vehicles strong. Due to policy restraints, almost every car on Korean roads has been designed and built locally. This scenario seems set to continue as local carmakers are opposing the entry of foreign vehicles despite an opening of the world auto trade. Future trends and outlook Firstly, the international car market is growing by around 2% pa and this set to continue for the next few years. This slow down is due to the increasing level of saturation in the largest car markets of the world. Analysts from EIU state that this saturation level may even translate into negative growth, given the recent trend of carmakers to opt for quality components which will increase the vehicle’s useful life. Secondly, the South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. According to EIU estimates, some countries in the region have witnessed cumulative falls of 70% this year. In Indonesia record sales reported in 1997 are not expected to be matched until 2005. In Malaysia it is expected to be 2003 before peak sales and production volumes are repeated and in the Philippines the market will take seven years to recover. In Thailand, the market for cars and commercial vehicles is expected to fall from almost 600,000 units per year to 125,000 this year. Thirdly, the global domination by the large automotive players has slowly abated with local manufacturers getting hold over the market. Japan, western Europe and the North American Free-Trade Agreement area comprising USA, Mexico and Canada are expected to account for 71% of the global park by 2005, down from almost 77% at the start of the 1990s. This has come about, as the concept of "regio-centric" cars is becoming popular.
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