As the global economy rebounds, the automotive industry faces what Information Handling Service (IHS) Automotive senior economist Charles Chesbrough calls a two-track global economy.
On one side are red-hot developing nations like China and India, where growing incomes will mean millions of first-time car buyers. Then you have the United States, Europe and other developed regions, facing a sluggish economic recovery buoyed for several years by replacement car sales, but then leveling off.
It all points up to strong world demand for cars and trucks, Chesbrough said at the Plastics News Executive Forum, held March 7-9 in Summerlin.
Since the global collapse of 2009, we've seen production increasing very dramatically around the world, with a very healthy rebound, Chesbrough said.
(In the wake of the March 11 earthquake and related damage in Japan, however, IHS forecasted that Japanese vehicle makers would lose production of more than 285,000 units through March 23 alone because of assembly plant shutdowns. Production was halted at as many as two-thirds of Japan's 72 transmission and engine plants, it said. Japan exports about 8.5 million transmissions annually, including 2 million to North America.)
Chesbrough said the auto industry is adjusting to two very different world markets, in a long-term trend.
The strong economic growth rates that we're expecting from the developing world are going to continue for the foreseeable future, barring any type of major oil crisis. The developed world will show a much slower growth rate, he said.
It's the difference in growth rates that are going to have major implications for the global economy, particularly for the automotive industry.
Overall, global light-vehicle sales grew 24 percent from 2001-07, before falling in 2008 and 2009. IHS Automotive in Northville, Mich., is projecting 35 percent global growth from 2010 through 2016.
IHS thinks sales will reach 100 million units in 2016 with China accounting for nearly one-third of that total.
China and India will fuel most of the growth. Over the next decade, in what Chesbrough called a massive change, China will add 200 million more households that earn enough money to buy a car.
China will overtake the U.S. as the world's biggest economy around 2035, he said.
India also is building its consumer class, and personal transportation is one of the first things people want to buy, he said.
The whole scope of the global economy is changing dramatically to these developing countries and the citizens are going to have this newfound wealth they never had before, Chesbrough said.
As U.S. light-vehicle sales plunged during the recession, China surpassed the U.S. in 2009. There's no turning back, he said.
But the IHS economist said the developed world does have some legs, thanks to consumers scrapping their older cars and buying new ones. Peak car sales came between 1996 and 2001, when 322 million vehicles were purchased, Chesbrough said.
Given the 10- to 15-year life of cars and light trucks, he predicts that 26 million will be scrapped this year, the vast majority of those in developed nations.
For the U.S., that means a solid upswing from just 10.4 million units in 2009, which was the lowest level in 40 years, Chesbrough said.