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What is the "experts" opinion about automotive market future?

Gregory Launay - Last update: January 26th, 2013

 

What car for my customer tomorrow?

Beyond energy and environmental issues, the fall of the automotive market since mid-2008 has forced the industry to some questioning.

The car has basically not changed since its creation (this statement may hurt some, but when you think about the main components and the overall architecture are unsophisticated ...) and it seems that she is forced at the beginning of the 21st century, at least more than it has ever done before.

Faced with a future so uncertain, many firms publish expert reports for CEOs ... Reports in which they try to predict what will happen tomorrow's market.

 

What is the approach adopted by consultancies?

The content of these documents is usually to anticipate technological market distribution (how many hybrid vehicles, electric vehicles, how?) Depending on different scenarios that take into account the evolution of oil prices and regulatory constraints.

A study by the Boston Consulting Group in January 2009, for example, gives the following results:

Evolution of technology mix in key markets in 2020 - Source: Bonston Consulting Group, The Comeback of the Electric Car? - 01/2009

There way the percentage distribution of different types of technologies (gasoline, diesel, hybrid, electric, etc..) On the four key markets of the United States, European Union, Japan and China on the horizon 2020. These results are given for three scenarios for which the constraint consumption (oil prices and regulations on CO2 emissions) is increasingly strong.

These results show that, whatever the scenario, the vehicle will remain purely thermal vast majority. Distribution of alternative technologies depends heavily on hand scenario.

All results are expressed as a percentage ... but what percentage of annual sales level?

Volume main markets in 2020 - Source: Bonston Consulting Group, The Comeback of the Electric Car? - 01/2009

The study gives us volumes for these key markets to 54.5 million units for the year 2020. Volumes in these markets totaled 48 million in 2007.

This study therefore takes two hypotheses. The first is that the auto market will continue to grow significantly by 2020. The second is that the level of this increase is not dependent on the different scenarios defined. In other words, the study considers that the level of oil prices and regulations on CO2 emissions will not have a material impact on the level of sales of automobiles ...

McKinsey uses the same approach in a study published in May 2009 (Roads Toward low-carbon future). It presents different distributions technological world market in 2030 according to three scenarios. As in the study of Bonston Consulting Group vehicles sold volumes are considered for all growth scenarios. They are given 75 million units in 2020 and 90 million in 2030.

Another example, a study by Frost & Sullivan, dating from the end of 2008, anticipates a mix of technological engines in 2015. Again the study focuses on the outcome of technological mix assuming that the volumes will in all cases growth.

Mix of engines produced - Source: Frost & Sullivan Global Powertrain Mix - October 2008

Finally finish by a study that engages in predictions focused on volumes. In September 2009 a study by Booz & Company gave predictions in an article entitled "The Best Years of the Auto Industry Are Still to Come."

Anticipation of changes in the global market by 2018 - Source: Booz & Company, The Best Years of the Auto Industry Are Still to Come - September 2009

We discover that the personal vehicle fleet could be multiplied by almost three to ten years. The study relies on this "S-curve" described when returning the gross domestic product per capita of a country's level of equipment in automobiles. This amounts to considering that all emerging countries can relatively easily in the next 10 years, adopted our customs automobiles. Again the impact of the scarcity of oil on the level of sales does not seem to be considered as an important factor.

 

What conclusions can we draw?

What messages are common to this kind of study? First we include the demand for cars is here. The need that people have to move, the demand for mobility, not disappear. Market growth is almost certain the business is assured ..., sleep peacefully!

It also includes the structure of the market will depend on the economic and regulatory constraints (tax, oil prices ...) and technological responses made by the manufacturers. It is up to business leaders to make the right choice today to be properly positioned on the markets of tomorrow.

In short this is a fairly conservative discourse and trend. The fundamentals are good, the preachers of doom can continue to scream. Do your job with a good strategic approach and all will be well!

 

A glance in the rearview mirror, we learn the recent past?

To be convinced that the future may not be so peaceful take a look at the correlation between oil prices, economic downturns and global automotive production.

Correlation between oil prices, economic downturns and global sales of cars - Source: CIBC & Freyssenet 2008, compiled by the author

Of the six observed global recessions since 1970 (the end of the thirty glorious years), five consecutive to a sharp increase in oil prices. Automobile production has been severely affected whenever one falls with strong volume.

Although this correlation is not proof of direct causality, it seems difficult to say that the price of oil has no impact on the level of sales .... So tomorrow, in a world where oil is scarce risk very seriously, it is so obvious that this market growth is assured?