Car sales in Japan, Russia, Brazil and India currently account for just under 1 in 5 of global sales. Their market share peaked at 21% in 2008, but is today back at 2005’s level of 17%. As the chart shows, it has been a roller-coaster ride for all of them:
- Japan’s 4.7m sales were 10% of the global total in 2005, but although current volumes are very similar, its share is now down to 7% (dark blue)
- The low point was in 2011 at 3.5m sales and 6% market share, and this month’s news of a sharp fall in Q2 GDP suggests a new downturn may now be underway
- Russia’s sales doubled to 2.9m between 2005-8, but then halved in 2009: its market share also doubled to 6% by 2008, but then fell back to 3% (orange)
- Since then, its volume recovered to 2.8m in 2012, but is currently back at 2.4m: its market share has therefore also slipped back to 3% from its 2012 peak of 4%
- Brazil’s sales surged from 1.4m in 2005 to peak at 2.9m in 2012: its market share rose from 3% to 5% (pink)
- But the slowing economy has caused volumes to slip to 2.6m and its market share to 4%
- India’s sales also surged from 1m in 2005 to a peak of 2.6m in 2012: its market share doubled to 4% (light blue)
- But since then, volume has dropped back to 2.4m and market share to 3%
This highlights the difficulty of forecasting sales volumes over an extended period.
Governments may not be able to change underlying demographics, which in the end will drive car sales. But they can use tax revenues to stimulate demand artificially for a year or more. Political and economic developments can also have a major impact, particularly on smaller economies such as Russia, Brazil and India.
As companies move into Budget season, the clear conclusion is that manufacturers and suppliers need to be far more flexible in their approach. As the IMF has warned, they also need to accept the lesson of the past decade that economic forecasts are unlikely to prove a good guide to the future.
But we can probably be confident in assuming that Japan’s ageing population will need fewer cars in future, as older people drive much less than when they were younger. Conversely, India’s younger population may well provide a reasonable basis for sustained growth, if the new Modi government implements its core policies.
However, there are clearly risks attached to both assumptions, so prudent companies will need to develop alternative Scenarios. History suggests that even if the overall assumptions prove correct, it could well be a bumpy ride.
This caution must also apply to Brazil and Russia, where political developments are moving centre stage as their economies weaken. They could do relatively well, if the right policies were implemented. But they could also do very badly if current problems continue to be ignored.