Vehicle sales are a good reference point for an economy’s health and this is where the growth of the automotive industry is especially worldwide. Building around 90 million vehicles annually calls for direct employment of nearly ten million people. The auto sector accounts for roughly six per cent of the world’s manufacturing employment mass.
Vehicles are built using materials from industries such as steel, iron, aluminium, glass, plastic, carpeting, computer chip and rubber. The auto industry contributes to roughly $550 billion in the form of various taxes across 25 countries and around $2 trillion, or ten per cent of global trade.
Numbers game
Sales volumes have grown from 68 million vehicles in 2006 to 90 million in 2015. During this 10-year timeframe, Europe saw a drop to 19 million from 22 million vehicles with the fall being particularly sharp in Italy (2.5 million to 1.7 million) and Spain (1.9 million to 1.2 million). Barring Russia, Europe’s auto market grew in 2015 from the preceding year which augurs well.
As for the Americas, sales were up a tad from 23 million in 2006 to 25 million in 2015. They actually dropped to 17 million in 2009 thanks largely to a slump of seven million vehicles in the US but made up lost ground later. The volume increase in the America region has been led by Brazil during this decade from 1.9 million to 2.5 million in 2015 reaching a peak of nearly 3.8 million in 2012.
Sales in Asia-Pacific and the Middle East doubled from 21.8 million to 44 million with China being the key catalyst with 7.2 million in 2006 and to a staggering 24.6 million in 2015. India saw numbers double during this period from 1.8 million to 3.4 million while Indonesia was up three-fold from 3.19 lakh to one million. South Korea was relatively sedate from 1.1 million to 1.8 million while Japan’s sales fell to five million from 5.7 million in 2006.
Africa is being touted as the next growth driver but its success will depend on stability, sound economic policies, solid institutions and good governance. Sales grew marginally from 1.3 million to 1.5 million largely in Algeria, Egypt and Morocco with South Africa volumes being flat through this decade.
The list of vehicle exporting countries has grown and the new kids on the block include Mexico, Thailand, Spain, the Czech Republic, Slovakia, Hungary and India. Going forward, the global auto industry faces challenges in the area of emission norms, safety regulations, ageing population in developed economies, changing customer preference towards personal mobility.
Increased urbanisation will compel automakers to make more environment-friendly vehicles while autonomous cars will soon become a reality. Vehicles may soon have to be designed keeping in mind specific needs across a growing buyer base. The traditional vehicle distribution model will gradually disappear with e-commerce gaining ground.
PwC Autofacts projects light vehicle (gross weight up to six tonnes) volume growing to 110 million in 2021 while excess capacity will fall from 34 million in 2015 to 32 million vehicles in 2021. Growth will largely come from Asia-Pacific (14 million) with the Americas, Europe and Middle-East taking up the balance with four million each.
The writer is Partner, Price Waterhouse