North America Isn't the Only Major Auto Market With Huge Headwinds
For the past two years, we’ve reported that the post-recession upswing in new car buying in North America seems to have plateaued. Environmental factors have led to Millennials buying fewer cars than their parents’ generation, and wealthy folk have proven unable to pick up the slack — as no amount of money allows you to drive several cars at the same time.
Most major carmakers posted declining U.S. deliveries in July, and August’s data proved a mixed bag. However, America isn’t the only big market that’s taking a beating. The First World seems to have collectively surpassed peak growth and now has to ride out an extended period where volume dwindles until some other nation can afford to import container ships full of sparkly new automobiles.
Bloomberg recently broke down how the world’s largest auto markets are fairing. You’ll be happy, or perhaps terrified, to hear the U.S. isn’t the only region in trouble.
While China remains the world’s biggest auto market, demand has fallen for the last several months. Trade tensions with the United States resulted in some buyers withdrawing from American models while political tensions hurt South Korean brands. The Chinese yuan has declined some since spring, and it’s been a pretty ugly year for the SSE Composite Index.
The Chinese Association Of Automobile Manufacturers posted a 1.5-percent increase in automotive sales in 2017 while predicted higher volumes in 2018, but the first half of the year could have gone better. The growth rate has actually been much slower than anticipated. Last month, LMC Automotive reported that China’s July selling rate of 28.4 million units per year was down 1.5 percent from June and represented the third consecutive month-over-month decline.
“In order to bolster the already slowing economy, the government has announced fiscal stimulus measures and the central bank has shifted to monetary easing, which could possibly help support vehicle sales in the short run,” LMC stated in its report. “The looser policies, however, go against the government’s campaign to rein in excessive borrowing, and thus raise a risk in the long-term economic and vehicle sales outlooks.”
The Passenger Car Association of China plans to release August’s data next week.
Meanwhile, Japan’s auto market has already crested the hill and is now coasting downwards. Passenger-car sales in Asia’s second largest economy fell 3.4 percent during the first eight months of 2018 compared with the same period a year earlier. A major factor is the country’s surplus of old people. Roughly 26 percent of Japan’s population is over 65, substantially higher than than any other country. As well, vehicle ownership is prohibitively expensive in many areas of the country.
Europe is more of a mixed bag. Though volume is up overall, neither Germany, France, Italy, nor the United Kingdom recorded any growth in the first six months of 2018. The reasons are a little more complicated. While the region’s biggest markets are also reaching peak automotive saturation (and suffering from younger generations that can’t afford new vehicles, just like North America and Japan), regulatory issues have made many prospective car buyers cautious.
For example, Europe shifted rapidly from an aggressively pro-diesel continent to one that is aggressively trying to to ban the fuel in an attempt to improve air quality. It’s also pushing for swift EV adoption, with widespread government support. Many consumers simply don’t know what kind of car to buy or what laws will be in place when it comes time to resell their older model.
This could also become an issue in other markets in the coming years, not to mention the likelihood that EV proliferation could create new waste and resource problems. Lithium-ion batteries are toxic, difficult to recycle, and are made of finite resources mined almost exclusively in the world’s poorest countries. What happens if the electric vehicle industry doesn’t turn out to be as green as everyone hoped and the pendulum swings back?
It might not matter. With automakers putting so much energy behind autonomous vehicles, ride-sharing platforms, and data acquisition, whether or not you purchase a car for yourself in 2030 could be irrelevant to their bottom line.
Jeff S on Sep 07, 2018
@RHD--Actually not a bad idea. Maybe the manufacturers could offer extra bonus cash equal to the trade in value for those who trade an older vehicle that is worth no more than 2k and owned by the owner for at least 1 full year with the agreement that the older trade-in be destroyed. Similar to the cash for clunkers but no Gov. support. I saw many of those cash for clunker cars that were on their last leg so many were ready for the scrap yard any way.
Big Al from Oz on Sep 09, 2018
I really think there are some countries that are not competitive at certain forms of manufacturing, like Australia and even the US. This emotive and nostalgic 1950s view of US industry needs to modernise. If the US frees up its auto market you could probably get your hands on perfectly good driveable "appliances" for well under $10k and even some good midsizers for $12k (USD) and use the money to expand your economy in areas you are competive at. That "saved" money could be used for healthcare, infrastructure, etc. I don't understand why many Americanss want to compete with developing nations. Or is this a Trump/Luddite thing, it makes you fell feel tough, ie, hey "don't mess with us" attitude?
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