North America in Better Shape, But Growth Mainly in Emerging Markets

LAS VEGAS – Global new-vehicle sales will reach 99 million units in 2015, up from 75 million last year, with emerging markets unsurprisingly leading most of that growth, J.D. Power and Associates forecasts.

The good news for U.S. retailers gathered here for the consultancy’s annual International Automotive Roundtable conference on the eve of the National Automobile Dealers Assn. convention? There are some positives on the horizon for the North American market, as well.

Worldwide, auto makers will sell 79 million vehicles this year, with volume rising to 86 million in 2013 and 93 million in 2014, predicts John Humphrey, vice president-Global Automotive Operations.

“While all that is good, it is important to look at where that growth is going to come from,” he cautions the gathering of mostly U.S.-based dealers.

Emerging markets accounted for less than 20% of global sales in 2000-2005, but by 2010 their penetration had risen to 51%. In 2015, these newer markets will account for 55% of sales, J.D. Power predicts.

“This is a very, very short period of time to see this sort of change,” Humphrey says.

For 2012, the Asia/Pacific will be the hottest region, with volume swelling 10% to 33 million vehicles.

Included in that is a 16% jump for Japan to 4.8 million vehicles, but Humphrey notes the market is rebounding from last year’s tsunami-crippled levels and his firm is not bullish on the country long term.

China is seen cooling slightly to 9% growth this year, on volume of 19.7 million vehicles, and J.D. Power forecasts a steady climb there to 35 million units annually in 2020.

The forecaster also is high on India, which it says will show an 11% gain this year to 3.2 million units, but Humphrey cautions India will have to overcome political issues and improve its still-lagging infrastructure if it is to maintain a strong growth pace.

North America is forecast to be the second-biggest gainer, at 8% to 16.4 million vehicles for 2012. J.D. Power sees U.S. sales increasing from 13.8 million units this year to 15.4 million next year, 16.2 million in 2014 and 16.5 million in 2015.

Perhaps more importantly, North American capacity is becoming better aligned with demand as volume grows, setting the stage for improved profitability. Last year, the market had capacity for 17.8 million vehicles but sold only 13.1 million, a 4.7 million-unit gap. By 2014, its unused capacity will be cut to 3.5 million vehicles.

“There’s better alignment between production and demand,” Humphrey notes. Other positives include stills pent-up demand, a slew of new products on tap and improved credit climate that has reopened the market for leasing and allowed some buyers to return to the market.

With capacity better under control, transaction prices have been on the rise in the U.S., as well, reaching $28,341 on average last year, from $27,644 in 2010, J.D. Power says. In the same period, incentive costs fell to $2,680 on average, from $2,871.

Western/Central Europe is the globe’s weak link, with sales forecast to fall 4% to 18.1 million vehicles, the consultancy says.

Humphrey says U.S. sales could fail to hit expectations this year, depending on the direction of oil prices, the psychological and real impact of the euro crisis and the pace of jobs growth. Should the bubble burst in China, that would be a serious blow, as well.

“Auto makers are depending a lot on China (financially),” he says.

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