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2007 global auto market analysis: China and India rockets

From www.gasgoo.com| April 09 , 2007

Mr. Gomes, the automobile industry expert of Canada Scotia Bank, commented recently on the 2007 global auto market trend that the China, India and Latin America auto markets will continue rocketing in 2007.  The mature markets of the U.S, Canada, Western Europe and Japan will be modest, affected by a sluggish economy. So, it is expected that the global auto market will suffer the end of 5 straight years of growth.

Chinese market
In 2006 the sales volume of the China auto market was over 4.1 million units - up 40%.  So China overtook Germany as the third largest market and will continue growing in 2007 in the same way. The medium and small vehicle markets grew fast in 2006, accounting for 1/3 of the market and nearly doubling its market share.

Mr. Gomes said: “China will become the second largest auto market after only the U.S by 2010. A relatively small percentage of car ownership, increasing income and decreasing prices are all incentives.  In the G-7 countries, the percentage of car ownership per thousand is 0.749 whereas China’s is 0.024 - far less than the former.  China is undoubtedly a huge market.”

Although GM, VW and the other foreign brands in China's market share as high as 75%, they are threatened by the self-owned brands Geely, Chery who concentrate on small and medium models, with an annual growth rate as high as 50%. In Chinese market, 80% of the car owners were the first time to buy cars, and they maintain a double-digit revenue growth rate. It is expected to remain above 15% annual growth rate till 2010. China's domestic auto manufacturers are not satisfied with the growing prosperity of the domestic market. China has become a car-exporting country in 2005. Chery company has an outstanding performance in their production of cheap models, which had been exported to more than 30 countries in Africa, Southeast Asia and the Middle East market. After blocked to export to the United States, Chery turns to enter the European market.

Indian market
"India is another vigorous auto market, the sales of which grew 20% in 2006.” Mr. Gomez added, "In India, only 1% of the population owns cars. Annual sales are expected to increase to 200 million before 2010. “India’s largest home-grown automobile manufacturer Maruti Udyog dominates Indian market, accounting for half the market share. GM, Suzuki and Hyundai plan to invest more than five billion U.S. dollars in India before 2012. Thus the production and sales of automobiles will increase by four times in the next 10 years.

Latin American market
Latin America will maintain a 4% economic growth rate for four consecutive years. Automobile production in 2007 will continue to maintain the growth. Brazil and Mexico are Latin America's two largest automobile markets and Peru is the fastest growing market. Peru’s vehicle sales in the first three quarters of 2006 increased with an alarming 41%. It will continue to maintain a strong double digit growth in 2007. Its vigorous economy is expected to maintain a 6% growth rate. Auto inventory in Peru is one of the lowest in the market -- only 24 cars per thousand. This is only one-fifth of the average level of Latin America and the Caribbean.

American market
"Compared to the rapid growth in economically underdeveloped market, Car sales in the American market in 2007 will be relatively weak due to the rise of oil prices and the slowdown in economic growth. Sales in 2006 reached 16.5 million vehicles with three percentage points down. The U.S. auto market is expected in 2007 to become the lowest point since 1998, estimated to be 16 million vehicles. "Mr. Gomes said. “Although the housing market in the United States showed some signs of stability. But in 2007 it will be the impacted by consumer confidence and purchasing capability in 2007 and appear weak. Since 2001, American families spent one trillion U.S. dollars in the purchase of housing. To a certain extent, this affected their ability to buy new cars and light trucks. The budget of American family to buy a new car in the next six months is to meet the lowest since 1970. Second-hand car market, to some extent has a reflection of the trend in demand for new cars. At the end of 2006 it dropped to the lowest point since December 2003.
Canadian markets
In 2007 Canadian sales of new cars and light trucks is expected to be 1.54 million units. Compared to 161 million in 2006, it is a decrease of 70,000 vehicles. The market of southern Canada and the Atlantic coastal areas will be more sluggish market performance. The employment near Ontario will drop by one percentage point, compared to the end of 2005 fall by two percentage points. While in the Alberta the employment will grow by 6%. New car sales in 2007 are expected to a new record, thus spurring the growth of the market in western Canada.

West European markets
Western European auto market in 2006 obtained modest growth. The high oil prices blew the positive effect of economic growth and raise of consumer confidence. It is predicted that the performance of Western European car market in 2007 will tick over. Germany, as the biggest auto market in Western Europe, since the beginning of January this year, the government will raise the rate of value-added tax by three percentage points reached 19%, which will have a serious impact on the purchase. Purchasing power had been release in advance in the end of 2006.
Japanese market
Japanese auto manufacturers have obtained a huge profit in the overseas market. Facing the slow growth in the European market, they will focus more attention on the local community for the next step. Japan's car market fell by 5% in 2006 and is expected to achieve sales of 4.5 million cars in 2007, reaching the average level over the past decade. But it is difficult to restore the level of 5.1 million units in 1990. In Japan, the population aged over 65 years accounted for 20%, therefore new car sales were suffered. When the Sales were in its peak period, the proportion of the population over the age of 65 is only 12%.

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