In the wake of Europe mired into a protracted meltdown with looming issues such as overcapacity, ballooning inventories and bulging operating losses irking the OEMs worldwide, 2012 proved to be a tough cookie for the global automobile market.
The crisis in the Euro bloc which is touted as the engine of global automotive industry, took its toll on the car sales, whereby the regional car sales dropped for the fifth consecutive year in a row, falling from 13.6 million in 2011 to just 12.5 million in 2012. In stark contrast, China saw a dramatic turnaround in its fortunes, registering 13.2 million cars in 2012.
According to Financial Times projection, China will produce 19.6 million cars and LCVs in 2013, as against 18.3 million in Europe, crowning China with 23.8 percent share of the global automotive market in 2013 as against 3.5 percent share in 2000. On the contrary, Europes share shrank horrendously over the period. From 35 percent in 2001, a record low level of 20 percent share is expected in 2013.
In 2013, automotive industry is likely to witness modest signs of improvement, with car registrations to rise by 5.1 percent, according to Economist Intelligence Unit. Asia will grab 43 percent of the global pie with majority of growth coming on the heels of India and China where there is swift wave of urbanisation and growth in middle income group.
However, research also reveals that the years of automotive investments in the Chinese market is likely to create overcapacity in the near future, whereby the manufacturers have to endure huge margin sacrifices. Thus quite appropriately, the Chinese automakers are diversifying their operations and tapping other markets.
Very recently, Chinese carmaker Great wall instigated green field plant in Bulgaria to serve the Eastern Europe. And why not? Bulgaria, the poorest member of the EU offers low production costs, cheap labour and a flat tax rate of 10 percent. This way, Chinese cars entered the European market without paying customs levies. Besides, Geely, another Chinese auto maker is banking on its acquisition of Swedens Volvo Cars.
In terms of sales, the US is in an unbeatable position as it dropped ample capacity during 2008-09 crises. In 2012, the sales in the US grew by 13.4 percent to the five-year high level of 14.5 million vehicles. In 2013 too, the US market is expected to account for 18.2 percent of the global total.
Another striking trend witnessed by the US auto market is the vivid turnaround in the fortunes of the dealers. On the back of car sales going up and number of outlets gliding down, dealers, on an average sold 812 vehicles in 2012. Moreover, with carmakers such as Volkswagen and Hyundai seeking to infiltrate the US market, the number is expected to touch 850 mark in 2013
Besides stunning opportunities, auto industry poses tough challenges to the fore. All through 2012 and in future too, those who ride the rollercoaster with ease will be the ones with efficiently diversified sales mix such as Volkswagen who realised record sales volume of 9.07 million in 2012, up 11 percent from 2011. Quite the opposite, Peugeot Citroen, with its sales portfolio largely concentrated in Southern Europe, reported a sales dip of 16.5 percent in 2012. As the sands are shifting, the key to success lies in searching the new battlegrounds.
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