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automotive | Global outlook


Emerging market light vehicle sales (units) Actual 2013 against 2014 forecast Source: LMC Group


to a stall in vehicle sales. Future expansion will be delayed. More worryingly, and in the context of weak- ened markets, a relatively rapid expansion in capacity in Brazil now appears less justifi able. If there is little, or only modest, demand growth over the coming years, plant utilisation levels in South America will be well below desired levels. That will pose a clear threat to profi tability in the region, says LMC. In Brazil, for example, expansions by a number of


vehicle manufacturers - including BMW, Mercedes, Renault and VW Group - are underway aimed at raising overall capacity by 1.3 million units by 2016. This may have made commercial sense 18 months ago, but it may now contribute to a fall in overall South American plant utilisation to 63-65% by 2016. Demand risks appear to be on the downside, so this situation could worsen further, according to the consultancy group. “Such low levels of utilisation in South America are


consistent with fi nancial stresses within the industry. It may well turn out that the drift away from high-income country automotive manufacturing has created over-extension in new localised operations close to the emerging markets that had previously promised so much,” says Jeff Schuster, LMC Automotive’s senior VP of forecasting in the Americas.


European recovery LMC predicts the west European car market will continue to recover and is predicting full year sales of around 12.2m units, up by 3.3% on 2013. Germany and the UK continue to perform well, with the markets of France and Italy also seeing some growth. However, If Western Europe is turning the corner, the same cannot be said in Eastern Europe. Russia accounted for sales of a little less than 2.6m units in 2013, according to LMC. While the consultancy group says it is yet to see a real downturn in the country, it adds that all of the fundamentals point towards a weaker market this year and for recovery in 2015 to be


12 INJECTION WORLD | June 2014


on a knife edge. The picture is further complicated by events in Ukraine, which has already prompted LMC to downgrade its forecasts by several percentage points. Sales in Turkey - always subject to a high degree of volatility - plummeted in March by 30%, underscoring the effects of the country’s political and economic fragility. “A large decline in the total East European vehicle market is not expected, but downside risks in certain countries within the region are clearly rising,” says Carol Thomas, LMC Automotive’s central and eastern European analyst.


Chinese sales are continuing to expand rapidly - sales were up by 10%, year on year in the fi rst quarter of 2014 - and, assuming a banking crisis does not emerge, the country’s automotive market should post solid growth this year.


However, Indian demand remains fragile. The rapid


expansion in demand that began in the mid-2000s went into reverse in 2013 as the economy slowed sharply. There is now little prospect for serious growth in 2014. In September 2013, LMC Automotive was forecasting growth of 9.2% but it has since revised this down to 3.1%. Given the political and economic uncertainty, the speed and timing of a return to vehicle market growth is subject to a signifi cant degree of, mostly negative, risk. The political troubles in Thailand, a country in which


a post-incentive situation is already leading to signifi - cant sales decline, poses a further threat to growth in Asia, LMC says.


Looking ahead While LMC says only some of these risks in the emerging vehicle markets may actually materialise, the combination of already-reduced baseline expectations and general instability are of increasing concern. However, global industry volume remains at record levels, due in no small part to the expansion in China, the completion of recovery in the US, and a West European market showing strong indications of climbing out of the depths of the worst automotive recession in living memory. “An expansion in the global light vehicle market of


around 3% this year – and that implies sales of over 87 million units – is still a reasonable assumption. But the key issue for some industry players will now be how reliant they are on some of the riskier markets in the world,” says Kelly.


About LMC Automotive Part of the LMC Group, LMC Automotive is a provider of automotive intelligence and forecasts to vehicle makers, component manufacturers and fi nancial organisations.  www.lmc-auto.com


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