Global Automotive Industry Outlook 2009

Rising Demand for Fuel Efficient and Affordable Cars to Spur Recovery of Global Automotive Industry

The global automotive industry has been deeply impacted by the economic slowdown with problems such as production overcapacity, high inventory and low profitability. Shrinking consumption and low credit availability are pushing down global automotive sales, which is expected to contract at a compound annual growth rate (CAGR) of around minus 5 per cent between 2007 and 2010. However, it is expected to jump back to sales growth with rising global economic recovery, restored consumer confidence and increasing demand for smaller and fuel-efficient cars, especially in emerging markets.

"Improvement in credit availability and increase in consumer confidence, catalyzed by government stimulus packages around the world and growing demand in Brazil, Russia, India and China (BRIC) and emerging economies will help aid the recovery of the global automotive market," notes the analyst of this research. The increase in use of cars and other private modes of transport in the rural regions is resulting in high CO2 emissions. Small, affordable and clean cars are going to be mega trends in the auto industry in the next five years, comprising more than 25 per cent of global vehicle sales, on the back of a pressing need to increase fuel efficiency and decrease emissions.

Automakers to Focus on Developing Optimal Product Mix

Automakers are burdened with a huge pile-up of inventory, due to weak demand and have had to cutback significantly on vehicle production plans and profitability targets for 2009. The uncertainty surrounding economic recovery and the continued lack of sufficient credit in the market is hurting sales and consumer confidence, which are key requirements for re-bound in positive sales. "Global sales fell by more than 8 per cent in 2008 resulting in huge losses for vehicle manufacturers and erosion of shareholder value," comments the analyst. "OEMs such as the Big 3 in the US and Volvo and Saab in Europe, face short-term continuity risks due to low cash reserves and working capital."

OEMs should continue to invest in growth areas such as affordable cars and alternate powertrain technology to offer an optimal product mix for future sales success. "With close to 20 per cent of vehicle sales constituting vehicles with alternate powertrain and alternate fuel type, automakers should look at creating an optimal product mix for the future, while trying to survive the current crisis using operational efficiency and cost-reduction strategies," advises the analyst.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following geographic areas in this research:

• North America
• Western Europe
• BRIC (Brazil, Russia, India and China)
• Central and Eastern Europe
• ASEAN