Market Overview

Global Auto Sales Set to Reach 93.5 Million in 2017, but Risk is Greater than Ever, IHS Markit Says

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Total 2017 global light vehicle sales will reach 93.5 million units, a
growth rate of 1.5 percent over 2016, according to the most recent
forecast from IHS Markit (Nasdaq: INFO), a world leader in critical
information, analytics and solutions. However, industry risk in mature
markets is at the highest level it has been since the Lehman Brothers
collapse and global industry downturn from 2008 through 2010, and will
be a key factor for the near future. Engine propulsion options are
expected to have an influence as well.

"Political uncertainty could cause a significant rift in light vehicle
sales both in the U.S. and Europe, as both regions are undergoing
fluctuations in policy, leadership and other dynamics," said Henner
Lehne, senior director, global vehicle group for IHS Markit.

In addition, IHS Markit forecasts in 2017 the decline of diesel vehicle
sales share in Europe will further accelerate more than the European
light vehicle market has experienced in the last decade. This represents
just the start of a growing trend of diesel decline expected in the
coming years, due in part to significant challenges around RDE
regulation alongside the arrival of the EU6d emission standards.

Despite the daily publicity, sales of BEV (battery electric vehicles)
and PHEV (plug-in hybrid electric vehicles) light vehicles also were
relatively flat between 2015 and 2016, according to IHS Markit analysis,
despite the ever-present longer-term growth fundamentals. Global BEV
production remains significantly below 1 million units and will
represent just 0.7 percent of new vehicle supply globally in 2017,
according to IHS Markit forecasts.

The majority of global growth can be attributed to a revised Chinese
automotive legislative regime, as Chinese-targeted auto excise duty
incentives are expected to continue through 2017, albeit at a lower rate
of 7.5 percent for qualifying vehicles (up from 5 percent in 2016).
Provisional figures analyzed by IHS Markit suggest that China accounted
for approximately 76 percent of the 2016 volume growth in global auto
sales, with December being the last month of a full-tax break stimulus
program.

The mature markets, together with China, were key to the overall 2016
automotive growth story, according to IHS Markit, with provisional 2016
year-end total industry volumes set at 92.1 million units globally, up
4.6 percent, with counter-synchronized auto sales cycles across regions.

Looking forward, IHS Markit expects China to continue to be the world's
largest car market for the foreseeable future, and has upgraded its 2017
China forecast to 28 million units (up 1.9 percent) and expected payback
effects will now be in play for 2018 (slipping 0.8 percent).

U.S. auto sales have lost some momentum already this year, and the
change of administration somewhat complicates the near-term picture. The
policies and changes proposed by the Trump administration regarding
trade and environmental regulations creates some uncertainty, countered
by a slightly improved economic picture for 2018–21, according to IHS
Markit analysis. It is difficult (and unlikely) to sustain and continue
to grow at the same rates the U.S. market has seen over the past 8
years, and a leveling off is underway. In 2017, IHS Markit forecasts
U.S. light vehicle sales at an unchanged 17.4 million units, a slight
moderation on 2016 levels, down just 1.0 percent.

For Western Europe, Brexit uncertainty, banking fears, and election
concerns are on the agenda for the EU projection—and after a decent 2016
(up 6.2 percent), the market could lose momentum for 2017, though IHS
Markit forecasts the industry will close out the year with 1.0 percent
growth. The outcomes of elections in France and Germany could skew
consumer confidence and policy, and therefore influence new vehicle
purchases. From a manufacturing perspective, the recent hard Brexit
announcements had various automakers publicly state that they would need
to revisit the terms of their investments, though some had made
agreements with the UK government following the Brexit announcement,
which intensifies the risk to UK-based auto manufacturing.

After four consecutive years of decline, the light vehicle sales market
in Russia seems to have finally reached its bottom. IHS Markit forecasts
a growth rate of 8.25 percent for 2017 – even considering the expected
stagnation in the coming 4-6 months. According to forecasts, in the
second half of 2017, a slight recovery is expected as the light vehicle
sales market will profit from somewhat improved energy prices, a
stabilized exchange rate and improved consumer expectations. However,
sanctions will remain a key negative driver, but IHS Markit also
acknowledges upside "risk of recovery."

South Asian demand should recover further in 2017 and light vehicle
sales in the region are expected to be 5.9 percent in 2017, but India is
expected to feel a negative demonetization impact and limit 2017 growth
to just 7.7 percent. Meanwhile, Association of Southeast Asian Nations
(ASEAN) car markets are forecast to accelerate by 4.6 percent as
recoveries continue in key markets. Japan and South Korea remain
similarly depressed by tax-related hangovers and economic (Japan) and
political (Korea) concerns.

Brazil remained firmly in the red for 2016, but appears to be close to
the cyclical low. According to IHS Markit forecasts, the country should
regain momentum through 2017 (up 1.1 percent). The Middle East region is
also forecast to stabilize, supported by oil prices and the end of
Iranian sanctions, with light vehicle sales forecast to grow 1.3 percent
from 2016.

IHS Markit 2017 Global Light Vehicle Sales Forecast
      CY 2016     CY 2017    

% Change
2016/2017

Greater China     28.0     28.5     1.9%
North America     21.1     21.0     -0.6%
West Europe     15.8     16.0     1.0%
South Asia     7.9     8.3     5.9%
Japan/Korea     6.7     6.7     1.0%
MEA     4.8     4.8     0.6%
Central/East Europe     4.0     4.1     4.5%
South America     3.9     4.0     2.1%
      92.1     93.5     1.5%

Note: Volumes in millions
Source: IHS Markit, February
2017

About IHS Markit (www.ihsmarkit.com)

IHS Markit (NASDAQ: INFO) is the automotive industry's leading source
for market-wide insight, expertise and advanced planning solutions. With
a reputation of enabling better decisions and better results for nearly
a century, the world's leading OEMs, suppliers and their transportation
partners rely on IHS Markit to power growth, improve efficiency and
drive a sustainable competitive advantage.

Automotive offerings and expertise at IHS Markit span every major market
and, the entire automotive value chain -- from product planning to
marketing, sales and the aftermarket. Headquartered in London, the
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powerhouse that includes more than 15,000 colleagues in 150 countries,
covering energy, chemical, aerospace and defense, maritime, financial,
technology, media and telecommunications. For additional information,
please visit www.ihsmarkit.com
or email automotive@ihsmarkit.com.

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2017 IHS Markit Ltd. All rights reserved.

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