Major Car Markets (and OEMs) Have Stopped Growing

The auto industry is shrinking. Or at least in mature markets like North America, Western Europe and Japan, it is.

Incredibly, vehicle sales in those markets are lower than they were 10 years ago. And the revenue of six of the largest legacy OEMs, when adjusted for inflation, has barely budged at all, or has even shrunk. This likely will set the stage for a price and market-share war the likes of which the industry has never seen.

A decade ago, the future sure looked brighter. Industry forecasters predicted in 2010 that global sales would top 100 million new vehicles a year by 2020. They thought sales would surpass 20 million a year in the U.S. But it never happened.

Global sales peaked at 92 million vehicles in 2019, and U.S. sales topped out at about 17 million. The COVID pandemic and chip shortage then crippled global sales. And while they will likely recover to their 2019 levels, the mature markets probably will never go much over that again.

I came to these conclusions after going through the sales, revenue and stock prices of Toyota, Volkswagen, Hyundai Motors, General Motors, Ford and Honda over the past 10 years. The numbers really tell a story.

I would have loved to include Stellantis in this group, but it didn’t exist a decade ago.

Let’s start with Toyota, the biggest car company in the world. From 2014 to 2023 its global sales increased by 1 million units to 11.2 million vehicles, a decade-long growth rate of 9.8%, or less than 1% per year. Its revenue grew 44.6% to ¥37 trillion. But over that period the yen devalued against the dollar by 42%. And because about 75% of Toyota’s sales are outside of Japan, its increase in revenue has a lot to do with stronger foreign currencies getting converted into weak yen.

As of this writing, Toyota’s stock is trading 177% higher than it did in 2014, which is a great return for shareholders and the best performance of this group of legacy automakers.

Volkswagen is the second-largest automaker in the world. From 2014 to 2023 its global sales fell by 900,000 units to 9.2 million. Its revenues grew from €202 billion to €279 billion, up 37.9%, or less than 4% a year on average.

Adjusted for inflation VW’s revenues are up 8% over the decade, or only 0.8% a year on average. Clearly, investors don’t like what they’re seeing. VW's stock price is down €63 a share, or 31% compared with a decade ago.

The Hyundai Group, including Kia and Genesis, sold 7.8 million vehicles in 2014, but only 7.2 million in 2023, so it’s slightly smaller than it was a decade ago. But thanks to moving its brands upscale, revenue grew 73%, the highest by far amongst these automakers.

While Hyundai’s stock is only up 7%, Kia’s stock, which is traded separately, has risen 116% and is on a tear right now.

Honda also had a tough decade. Last year it sold 11% fewer cars than it did in 2014. Its revenue rose 35% in that time, but as already pointed out, the weakening of the yen helped inflate that revenue number. Honda’s stock is up 30%, a growth rate of about 3% a year on average – not great, but better than putting your money in a bank account.

GM has shrunk the most of any automaker, mainly because it abandoned so many global markets, notably Europe. In 2014 GM sold 9.9 million vehicles. Last year it sold 6.1 million, a precipitous 38% drop. And even that number is misleading. That includes over 1 million Wuling cars in China in which GM is a minority partner. Even though it’s selling far fewer vehicles, GM’s annual revenue is $16 billion higher than it was a decade ago. Yet, adjusted for inflation it should have been nearly $30 billion more, just to match what it brought in a decade ago.

And this helps explain why its stock price has gone nowhere. The price is exactly where it was in 2014, and in inflation-adjusted dollars, it’s even lower.

Ford is a similar story. With global sales of only 4.4 million vehicles, it’s now selling 30% fewer cars, trucks and vans than it did 10 years ago. And while its 2023 revenue of $176 billion is up 20%, it should have been up another $13.7 billion, just to keep pace with inflation.

This is a key reason why Ford’s stock is trading nearly 27% lower than it did in 2014.

What these numbers show is that these major automakers are stuck in a rut. Yes, some like Toyota and the Hyundai Group are doing better than the others. But it’s all relative. They’re really not doing all that great.

Since the major markets are not growing, automakers are going to have to fight tooth and nail to hold onto the customers they’ve got. Because if you lose customers, you lose sales volume. If you lose sales volume, you lose manufacturing scale. If you lose manufacturing scale, your profit margins fall. And if your profit margins fall, it’s only a matter of time before you go out of business. And so, I believe we’re going to see a war for market share like we’ve never seen before, where sales incentives and price cuts rule the day.

In fact, in China, it’s already begun. The price war there started over a year ago and is only gaining steam. It’s only a matter of time before it spreads worldwide –especially in those markets that are no longer growing.

John McElroy (pictured, left) is the president of Blue Sky Productions, which produces “Autoline Daily” and “Autoline After Hours” on www.Autoline.tv and the Autoline Network on YouTube. The podcast “The Industry” is available on most podcast platforms.