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April 16, 2014

Vorsprung Durch China: Sales Restrictions in Chinese Cities Will Not Stop Audi Becoming the World’s Best-Selling Premium Brand

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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There has been a flurry of announcements recently regarding the record sales of Audi, BMW and Mercedes-Benz cars in March and the first quarter of 2014. Better weather in the US, the recovery of car sales in Europe and the later timing of Easter this year are all cited as reasons for the on-going surge in demand for the German premium carmakers’ offerings. Whereas these are all contributory factors, the omission of any reference to the swelling ranks of wealthier consumers around the world who can afford upscale cars, especially in China, is noticeable. After all, it is this ever expanding pool of new consumers in their largest market that will ultimately make Audi the best-selling premium brand in the world. Car sales restrictions in Chinese cities will naturally slow proceedings but Audi’s investments in both its dealer network and local production of compact models is bound to more than compensate.

Two years ago, I discussed the correlation between sales of Audi, BMW and Mercedes brand cars and the development of households with over US$100,000 annual disposable income and the predictions made then still hold up today. First, China became the largest market for the combined sales of Audi, BMW and Mercedes in 2012. In fact, China became the largest single market for Audi in 2011 and for BMW in 2013, with only Mercedes still more dependent on sales in the US and Germany. Second, global sales for the three German premium brands are still on track to easily exceed 5 million units in 2015 – in fact, the 5-million milestone is likely to be reached in 2014 given the recovery in the US and Europe and the continuously rising number of affluent households around the world. Third, despite the model offensives of BMW and Mercedes, Audi’s leadership in China will propel it to become the largest premium carmaker, albeit not before 2015.

Continue reading "Vorsprung Durch China: Sales Restrictions in Chinese Cities Will Not Stop Audi Becoming the World’s Best-Selling Premium Brand" »

April 4, 2014

Car Producers in Russia Hit a Speed Bump but the Industry’s Outlook Remains Positive

Justinas_LiuimaAnalyst Insight by Justinas Liuima - Industry Analyst

Russia’s new car market is one of the fastest growing in Europe and is set to outgrow Germany by 2020, although the crisis in Crimea is likely to hamper overall growth in 2014. Nevertheless, some of the producers outsourcing locally-produced components could even benefit from the plummeting rouble. The long-term industry outlook also remains positive as first-tier suppliers are planning investments in Russia in order to improve the component supply chain.

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April 2, 2014

Carmakers Finally Latch on to the Importance of Europe’s Female Consumers

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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With new car sales in Western Europe declining even further in 2013, carmakers are understandably seeking ways to maximize their sales in the region and are finally latching on to the potential that female consumers offer. FIAT and Citroen for example are finding new ways to target the female car buyer and initiatives from other car brands are sure to follow.

Similar to the increasing share of older people among the employed population of Western Europe, the share of the workforce that is female also continues to consistently rise. In fact, whereas the male employed population is only expected to grow again from 2015, the number of female workers in Western Europe only dipped in 2009 and has been climbing again since. As a result, women account for 46% of the employed population in 2014, up from 44% as recently as 2007.

This growth in the female workforce is also changing the driving population - in the UK for example, women now account for more than 40% of driving license holders according to the Driver Vehicle Licensing Agency (DVLA). Although growth in the female population is expected to decelerate, women are still trending towards accounting for half of the employed population of Western Europe and the importance of producing and marketing cars to appeal to women cannot be overstated.

Male and Female Employed Population in Western Europe, 1991-2030

Source: Euromonitor International

Continue reading "Carmakers Finally Latch on to the Importance of Europe’s Female Consumers" »

March 27, 2014

Declining Savings Ratios Support Recovery of European Car Sales

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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GDP growth is commonly used as a key indicator of car demand and in Western Europe annual GDP growth over 2% typically translates into an increase in new car registrations. Economic growth certainly helped to fuel the surge in new car registrations around the region from 2004 to 2007. Since 2008, however, GDP growth has stayed below the 2% threshold every year except for 2010 (even that was a bounce following the 4% decline in 2009). As a result, car sales in Western Europe have declined every year since 2008, other than a slight upturn in 2009 when they were artificially inflated by numerous incentive schemes.

Western European Passenger Car Registrations and GDP Growth, 1990-2013

Source: ACEA, Euromonitor International

Continue reading "Declining Savings Ratios Support Recovery of European Car Sales" »

March 22, 2014

Less is More: As Predicted, City Cars Thrive in the UK’s Resurgent Car Market

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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The UK new car market bucked the trend of falling car sales in Western Europe in 2013, recording growth of 10.8%, compared to a 2.1% decline in the region. However, this pales into insignificance compared to the doubling of sales of City cars in the UK over a period of just two years, tying in exactly with numerous trends that Euromonitor has previously identified as resulting in increased demand for smaller cars in the UK.

 

Although the Pace of Recovery will Slow, the Outlook for the UK Car Market Remains Positive

Fuelled by a combination of economic recovery, low interest rates, PPI payouts, rising consumer confidence and attractive finance deals (especially in the form of PCP), this comes as little surprise. Nevertheless, the fact remains that new car sales in 2013 were still 5.8% lower in 2013 than in pre-crisis 2007 and 12.2% lower than in the record sales year of 2003. The outlook for demand is broadly positive (although market growth will be far more subdued in 2014, sales are likely to fall in 2015 and demand is not expected to return to the peak level of 2003 before 2020). Underpinning this expected long-term recovery of new car sales is a return to consistent GDP growth over 2% from 2016, which is typically the threshold which supports increasing car sales in the UK. Furthermore, there is also a return to growth in the number of households with annual disposable income over US$25,000, the development of which new car sales have tracked historically.

Continue reading "Less is More: As Predicted, City Cars Thrive in the UK’s Resurgent Car Market" »

March 20, 2014

Premiumisation of Russia’s Car Market Will Continue Unabated

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

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Car sales in Russia were decimated by the financial crisis as the credit-led boom dried up seemingly overnight. Demand recovered to pre-crisis levels by 2012 but contracted 5% in 2013 as economic growth fell to low levels by emerging market standards. However the surge in demand for premium cars has been relentless – not only did sales bounce back to 2008 levels in 2011 but, while the market struggled in 2013, sales of premium vehicles grew by 6% y-o-y.  In fact, the premium share of the market has consistently grown over the last decade and now accounts for 7% of all light vehicle sales compared to just 2% in 2003. And the income distribution outlook means that the premiumisation of Russia’s car market will continue unabated.

Premium and Mainstream Light Vehicle Sales in Russia by Volume, 2003-2013

Source: Euromonitor International from JATO Dynamics and AEB

Continue reading "Premiumisation of Russia’s Car Market Will Continue Unabated" »

March 10, 2014

The Rise and Fall of Car Traffic

Global Car Traffic Volume By Country

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Car traffic volume continues to rise in the majority of countries for which data are available. One particularly notable exception is the USA where car traffic has declined by 4.9% since 2007 – equivalent to 130 billion fewer car-kilometres in 2012 than in 2007. The USA continues to be home to the world’s largest car parc with 129 million cars in use in 2012 and even two-thirds of the lowest earning 10% of households own a passenger car – the highest proportion outside of the Middle East.

Continue reading "The Rise and Fall of Car Traffic" »

March 7, 2014

Thailand’s Troubled Car Market Makes Investment Elsewhere in the ASEAN Region More Attractive

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

I read with interest an article in the 5 February edition of the Financial Times, "Japanese Car Sales Plunge in Thailand", which outlines that Mazda and Mitsubishi are the latest carmakers to report declining sales in Thailand in their third-quarter results. With ongoing political unrest and a poor prognosis for demand, autos investment will surely come under increased scrutiny and make some of the country's neighbours appear more attractive in the process.

Light vehicle sales in Thailand amounted to 1.27 million units in 2013, confirming my suspicions back in July that Toyota’s outlook of 1.3 million units was probably optimistic. To recap, calculations based on household incomes suggest that demand in Thailand was inflated by more than 500,000 units in 2012, even factoring in any pent-up demand that accumulated in 2011 as a result of the floods. Although many of these new vehicle purchases may not have been made at all without the tax rebate, many others would have been simply brought forward and so the payback in 2013 was inevitable.

There is indeed “an increasingly affluent population” in Thailand as the FT article commented, but there are still only so many consumers who can support new car sales and, in conjunction with the current political unrest, even Honda's expectation of a drop in sales of up to 25% this year could prove to be ambitious. In fact, without a new round of incentives and/or a permanent change to the vehicle duty regime, I cannot envisage the market returning to the 2012 level again before 2020.

Moroever, I can’t help but think that this poor prognosis for car sales and the current political instability will have a damaging impact on autos investment in Thailand. Japanese carmakers especially must be looking carefully at Thailand now and this can only benefit other countries in the ASEAN region. Incidentally, barring any stimulus packages in Thailand or natural or economic disasters, Indonesia will be ASEAN’s largest vehicle market from now on. However, it remains to be seen whether, in order to attract autos investment, any ASEAN countries will actively capitalise on Thailand's woes.

Continue reading "Thailand’s Troubled Car Market Makes Investment Elsewhere in the ASEAN Region More Attractive" »

February 27, 2014

As Cars Increasingly Become Smartphones on Wheels, Their Makers Need to Support Both Android and iOS

Neil-KingAnalyst Insight by Neil King - Automotive Analyst

View Neil King's profile on LinkedIn

AppConext Auto recently released an infographic, “Wheels in Motion”, which states that “according to a survey by Accenture, in-vehicle technology was overwhelmingly named as the most important factor in car purchasing decisions for US-based buyers”. No wonder then that cars are increasingly becoming “smartphones on wheels”, but the question still remains as to which operating system the connected vehicle should feature. I consider this conundrum with the aid of Euromonitor International’s data on smartphones by operating system.

Ford surprised the world as recently as February 2012 by launching its new small MPV, the B-Max, at the Mobile World Congress in Barcelona instead of at the Geneva Motor Show, which opened just a week later. Less than two years on and CES2014, the Consumer Electronics Show held in Las Vegas in January, played host to carmakers such as Audi, BMW, Ford, Kia and Mercedes, unveiling new products and/or technology. The announcement at the show that especially piqued my interest was the creation of the Open Auto Alliance, which a Cnet.com article on 6 January referred to as “a partnership with carmakers General Motors, Audi, Honda and Hyundai, as well as with chipmaker Nvidia, to bring the Android operating system to vehicles in 2014”.

Continue reading "As Cars Increasingly Become Smartphones on Wheels, Their Makers Need to Support Both Android and iOS" »

February 19, 2014

How Best to Recharge a Drained UK Electric Car Rental Market?

Ben DaviesAnalyst Insight by Ben Davies

View Ben Davies's profile on LinkedIn

The UK market has seen negligible demand for electric car rental through traditional channels (excluding the car sharing model), despite increased focus on environmental awareness from consumers, and the car rental industry. The various factors involved offer a cautionary tale - poor infrastructure and consumer awareness set against the backdrop of UK austerity have led to these vehicles being poorly positioned. While they may be the future of car rental, the future remains distant.

Why Aren’t Electric Cars More Popular?

The lack of infrastructure and consumer awareness on the market is a major factor affecting this segment. Concerns over the range that these vehicles can cover without running out of power continue to deter consumers who fear they will be marooned on a motorway, and while there may be an increased quantity of charging stations available in London, they remain largely outside mainstream consciousness. A further area of uncertainty for consumers is how the cost of recharging compares to that of refuelling. Moreover, the fact that these stations are so heavily concentrated in London suggests that these cars can only realistically be supported within London.

Continue reading "How Best to Recharge a Drained UK Electric Car Rental Market?" »

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Recent Posts

Vorsprung Durch China: Sales Restrictions in Chinese Cities Will Not Stop Audi Becoming the World’s Best-Selling Premium Brand

Car Producers in Russia Hit a Speed Bump but the Industry’s Outlook Remains Positive

Carmakers Finally Latch on to the Importance of Europe’s Female Consumers

Declining Savings Ratios Support Recovery of European Car Sales

Less is More: As Predicted, City Cars Thrive in the UK’s Resurgent Car Market

Premiumisation of Russia’s Car Market Will Continue Unabated

The Rise and Fall of Car Traffic

Thailand’s Troubled Car Market Makes Investment Elsewhere in the ASEAN Region More Attractive

As Cars Increasingly Become Smartphones on Wheels, Their Makers Need to Support Both Android and iOS

How Best to Recharge a Drained UK Electric Car Rental Market?