The credit-crisis, recession and the trouble in equity and housing markets have pushed the North American automotive industry to the brink. Assembly volumes are expected to drop from 12.6 million in 2008 to 10.8 million in 2010 (source: PwC Automotive Institute). Hopefully, massive industry-initiated and government-led restructuring efforts will help North American auto makers bounce back.
Western European annualised sales in November 2008 were down to 11.2 million units as compared to 15.3 million units in April 2008. The forecast for sales is in the range of 12-12.5 million units in 2009 (source: PwC Automotive Institute). The overall market outlook is weak due to the crisis, falling housing equity market, rising unemployment and contracting economies.
The East European economies were performing well, especially countries like Russia, due to higher global oil prices and minerals. Sales in 2008 stood at 2.5 million units. The outlook for 2009 is grim and there is an expectation that the volumes will drop by more than a million units. Other economies in East Europe, especially Turkey, continue to struggle; the country exports over 80% of light assembly vehicles and its exports are falling.
The Japanese market has shrunk over 30% compared to 1999. Exports are falling due to difficult market conditions in the US and the UK and currency movements have adversely impacted Japanese OEMs. Most of the auto makers in Japan are responding to the unprecedented market conditions by cutting back on production and terminating temporary employee contracts. The vehicle assembly output in Japan will continue to decline in the future.
The developing economies of India, Brazil and China have also been impacted. In the long run, the assembly volume in Bric countries will increase significantly from the 14 million units in 2008 to over 19 million units in 2012 (source: PwC Automotive Institute).
The OEMs and component suppliers who have the right manufacturing footprint, a favourable product mix and a good market share in the emerging markets will have the strength to weather the downturn. In addition, these OEMs and suppliers will have the edge on effectively addressing issues such as climate change and fuel-efficiency through the right product mix.
The author is auto analyst, PricewaterhouseCoopers