By Stuart Burns
We talk of copper or iron ore’s role as a bellwether of the global economy, but in many ways the auto industry is an even more accurate measure — certainly of consumer demand, which ultimately is the driver of nearly all industrial endeavors.
Automotive production has fared differently in different regions, but globally, in spite of the Japanese tsunami hitting supply chains, in spite of the eurozone debt crisis and in spite of a slowing China, automotive has had a record year. According to the Financial Times, both IHS Automotive and LMC Automotive (formerly JD Power Automotive Forecasting) estimate that sales of cars and light trucks will have grown by about 4 percent this year to 75 million vehicles.
The resilience of the U.S. economy continues to defy worries elsewhere. The report states Russia, Turkey and South America production grew the fastest, but the U.S. still expanded production faster than China, up 9 percent against China’s 5 percent. Hit by the tsunami and associated power cuts, Japanese production retrenched 20 percent this year, but is expected to recover next year, expected to add 78 to 79 million units in 2012.
Another intriguing development is the jostling for largest manufacturer, a position long held by GM, then lost to Toyota (NYSE:TM) before being reclaimed by a renewed GM (NYSE:GM) aided by sales in China. Now VW (VLKAF.PK is pushing for top spot, a position analysts are expecting VW may already have achieved this year, if sales at GM’s Chinese minority-owned brand Wuling are excluded, as this graph shows.
Source: Financial Times
IHS forecasts VW’s full-year production at 8.45 million units, followed by GM with 8.1 million. LMC expects VW to produce 8.66 million light vehicles this year, and GM just more than 8 million.
Neither should crow too loudly. Toyota, the No. 1 producer since 2008, is already back to full production and likely to regain the top slot in 2012. VW’s greatest success story has been in China, where it led the charge as an early investor in 1984. The German carmaker delivered 2.1 million vehicles to Chinese customers in the first 11 months of this year, an increase of 15.5 percent on the same period a year earlier, cementing China’s position as VW’s largest market.
The company will invest €14 billion in 2012-2016, in an attempt to double production capacity to 3 million units by 2015 and increase its presence in the south of the country, a report says. In addition, the firm is getting back into production in the U.S. for the first time since the 1980s with a plant in Chattanooga, its 62nd worldwide.
Interestingly, the major car producers are said to be more worried by competition from new upstarts such as Hyundai (OTC:HYMLF), Kia (OTC:KIMTF) and the like shaking up the automotive world than any drop in demand. On the basis that competition drives innovation and quality improvements, we have to say – ultimately those upstarts will benefit U.S. all.