CARS IN EMERGING MARKETS
A global love affair
Nov 13th 2008
From The Economist print edition
Emerging markets are the car industry’s big hope. But it won’t be an easy ride, says Matthew Symonds (interviewed here)
THERE has rarely been a tougher time to be a carmaker. Squeezed by the credit crunch, rocked by the seesawing price of oil and now faced with a nasty recession as the banking crisis infects the real economy, the traditional markets of North America, western Europe and Japan, already sluggish for several years, have all but packed up. In America car sales are running at about 16% below last year’s level. Detroit’s struggling big three-General Motors, Ford and Chrysler-are in dire straits. They have wrung a $25 billion bail-out from Congress and are now looking for much more. In Europe the market is also collapsing. Sales in Japan this year are expected to be the lowest since 1974.
However, not all is doom and gloom. Mature vehicle markets may be close to saturation, but there is huge unsatisfied demand in the big emerging car markets of Brazil, Russia, India and China (the so-called BRICs). Although not immune from the rich countries’ troubles, they are likely to suffer much less. For one thing, levels of personal debt are far lower and a smaller proportion of cars are bought on credit. For another, the BRIC economies have been expanding so fast that even a slowdown should still leave them with growth rates that look respectable to Western eyes.
One measure of the BRIC countries’ new importance to the car industry is that, recession or not, global car sales in 2008 may still hit an all-time record of about 59m. For the first time passenger-vehicle sales in the BRICs, at around 14m, are likely to overtake those in America, which are expected to be the worst since 1992. As recently as 2005 America outsold them by over 10m. By the end of this decade China, already the world’s second-biggest market, will probably overtake America’s sales of 16m-17m in a “normal” year. In Brazil sales have increased by nearly 30% in each of the past two years. Russia is likely to overtake Germany as Europe’s biggest market within the next two years, with sales of around 3.5m. Meanwhile, Tata’s $2,500 Nano, due to be launched in early 2009, is designed to do for India what the Model T Ford did for America 90 years ago.
“金砖四国”对汽车工业来说具有新的重要性，其中一个数据是：不管萧条与否，全球2008年的汽车销售仍创历史记录，达到大约5900万辆。”金砖四国” 的载人汽车销量第一次达到约1400万辆，有可能超过美洲（其销量预计为1992年来最差的一年）。2005年美洲比”金砖四国”的销量多1000万辆。中国，已经是世界第二大市场，到2010年，其”常规”年份的销量将超过美国1600万-1700万的年销量。过去两年巴西的销量每年都增加将近30%。俄罗斯两年之内可能超过德国成为欧洲最大的汽车市场，其销量大约为3500万辆。与此同时，塔塔2500美元的Nano，将于2009年年初上市，这是为印度定制的汽车，就像90年前福特为美国定制的Model T。
It is the irresistible combination of rapid economic growth, favourable demographics and social change in the BRICs that is coming to the carmakers’ rescue and that is likely to account for nearly all their growth for the foreseeable future. America has more than 900 cars (including light trucks) for every 1,000 people of driving age. In the big western European countries and Japan, where public transport is better and population is denser, the figure is a little over 600. But in Russia it is below 200, in Brazil about 130, in China around 30 and in India less than ten.
When times are hard, an American family that already has two or three cars will simply postpone buying a new one. But a potential customer in an emerging market who has been saving for years to buy his first car will still want to go ahead. As Carlos Ghosn, the boss of the Renault-Nissan alliance, put it at this year’s Beijing motor show: “Nothing can stop the car being the most coveted product that comes with development.”
The new champions
No wonder that all the big carmakers are fighting like rats in a sack to win the largest piece of the action. Already, emerging markets have made the difference between life and death for some of the most famous names in the industry. GM’s survival would be in even greater doubt without the meteoric growth it is seeing in China. Thanks in large part to the BRICs, a record 65% of GM’s sales in the first quarter were outside America.
When Italy’s Fiat was in danger of going out of business a few years ago, its Brazilian operation came to the rescue. Adam Jonas of Morgan Stanley, a bank, estimates that 65% of its net income last year came from emerging markets, mostly from Brazil. Volkswagen, the market leader in China, believes it will soon be able to challenge Toyota as the world’s biggest carmaker. In Russia Renault has taken a 25% stake in the country’s biggest local carmaker, AvtoVAZ, and its Logan is the first of a new wave of global low-cost cars.
几年前当意大利的菲亚特处于关张的危险中时，是它在巴西的业务拯救了它。据摩根•斯坦利银行的Adams Jonas统计，去年其65%的纯收入来自新兴市场，绝大部分来自巴西。大众，中国的市场领袖，相信它不久将能够挑战丰田成为世界最大汽车制造商。俄罗斯的雷诺已经收购了该国最大的本地汽车制造商AvtoVAZ 25%的股份，并且其Logan汽车是全球低价汽车新浪潮中的首批产品。
Makes such as Mercedes, BMW and even Bentley and Ferrari are now common sights on the streets of Moscow and Shanghai. As Mr Jonas points out, emerging markets account for more than a third of the world’s rich but only about 15% of luxury-car sales.
These markets have much in common, but each is also remarkably different. In China buyers turn up their noses at small cars. The market is still dominated by joint ventures with foreign firms, but the strongest local manufacturers are rapidly expanding production.
Russia still has a sizeable indigenous industry, but many of its products hark back to the old Soviet Union. Like the Chinese, Russians like high and wide SUVs. By contrast Brazilians prefer their cars small. India has established itself as an exponent of what car-industry executives call “frugal engineering”-innovation in the cause of ultra-low cost. Diesel engines are almost unknown in emerging markets other than India because poor-quality diesel fuel is associated with trucks. In Brazil nearly all new cars are able to run on ethanol.
Despite the social and economic benefits that widespread car ownership brings, its spread in developing countries has raised fears about its environmental consequences, especially carbon emissions that have climate-changing effects. Given a rapidly growing world car population and dwindling oil supplies, fuel prices are bound to rise in the long term.
Infrastructure is another big worry. In China new highways are being built on much-needed agricultural land. In India nearly half the traffic runs on just 2% of the country’s roads. In the megacities of the developing world, from São Paulo in Brazil to Mumbai in India, cars often move at less than walking speed, stuck in traffic jams.
According to Mr Ghosn, the only way to give people the cars they want without wrecking the planet is to move quickly to producing zero-emission vehicles, probably powered by batteries. “Nothing else will prevent the world from exploding,” he says. Others in the industry may quietly agree, but they are less confident that the technology to power them will arrive in time and at an acceptable price. And only governments can build the roads that will accommodate so many more cars. For the world’s carmakers the road ahead is full of opportunities, but also many risks.