• 3 minutes Cyberattack Forces Shutdown Of Largest Gasoline Pipeline In United States - Zero Hedge
  • 7 minutes The Painful Death of Coal
  • 11 minutes Forecasts for Natural Gas
  • 14 mins U.S. Presidential Elections Status - Electoral Votes
  • 1 min Is the Republican Party going to perpetuate lies about the 2020 election and attempt to whitewash what happened on January 6th?
  • 10 hours Electric vehicle market growth is a blessing for some metals — and not a big worry for oil
  • 10 hours 1 in 5 electric vehicle owners in California switched back to gas because charging their cars is a hassle, new research shows
  • 15 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 50 mins Renewable Energy Growth Rate Jumped 45% Worldwide In 2020; IEA Sees 'New Normal'
  • 17 hours Joe Biden's Presidency
  • 2 days CRAPPIFORNIA DOES IT AGAIN! California proposes to steer new homes from gas appliances
  • 7 hours Сryptocurrency predictions
  • 2 days How US Capitalism Uses Nationalism
Oxford Business Group

Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…

More Info

Premium Content

The Global Car Industry Is Finally Set To Rebound

The global automotive industry took a significant hit last year on the back of a Covid-19-related slump in activity. However, a more positive global outlook is set to boost demand, boding well for automotive manufacturers in emerging markets. The automotive industry was one of the manufacturing segments most affected by the pandemic: coronavirus-related disruptions to trade and travel, along with the associated economic fallout, badly affected vehicle demand around the world.

According to analysis from Moody’s, global light vehicle sales fell by 16% in 2020, with the total number of units sold dropping from 90.3m to 75.8m.

The figures differ considerably from region to region, however. Total sales were estimated to have fallen by 25.2% in Western Europe and 15.2% in North America, but by just 1.9% in China.

While not as severe as the 27% reduction in sales seen in the first half of the year, the year-end result was still significantly worse than the 9% drop resulting from the global financial crisis of 2008.

However, amid an improving economic outlook – with the IMF forecasting global growth of 5.2% this year – most analysts have predicted a significant rebound in sales.

Related: Why Gazprom Cut Gas Supply To Europe Amid Rising Prices For example, Moody’s expects global light vehicle demand to increase by 7.7% and IHS Markit has forecast a 9% gain, while Standard & Poor’s anticipates vehicle sales will rebound by 7-9%.

Recovery to support EMs

The forecast is welcome news for emerging markets such as Mexico, Thailand, and Morocco, all of which have significant automotive industries.

Mexico, the world’s sixth-largest vehicle producer before the pandemic, suffered a 21% fall in output last year, with the number of units manufactured dropping from 3.8m to 3m. This included a dramatic year-on-year contraction of 98.8% in April, during the early stages of the outbreak, when production fell from 300,100 to just 3700 vehicles.

Similarly, in Thailand – the world’s 11th-largest carmaker – automotive production fell by 30%, from 2m to 1.4m.

Given that vehicles are Mexico’s largest industrial export product, and that auto manufacturing makes up 10% of Thailand’s GDP, a rebound in production would provide a substantial fillip to both economies.

The increase in demand is expected to be particularly pronounced in Western Europe and North America, with Moody’s predicting spikes of 12.2% and 5.8%, respectively, in these regions. This should help stimulate activity in Morocco, where around 90% of the vehicles produced are for export, and Mexico, which benefits from its position as a signatory of the United States-Mexico-Canada Agreement.

On top of the anticipated increase in global vehicle demand, these countries may also benefit from additional investments from multinational carmakers.

In a process known as nearshoring, multinational companies are increasingly looking to bolster industrial capacity in countries close to their home or target markets.

This strategy is in part a reaction to the widespread disruptions to supply chains that accompanied the initial outbreak of Covid-19 in China – where a significant portion of global production is based.

Despite the projected improvement, the global automotive industry is expected to feel the lingering effects of the pandemic for some time to come.

For example, Moody’s does not expect global vehicle sales to reach pre-coronavirus levels until at least 2023, while some have warned that a delay in the rollout of vaccines or a fresh outbreak could negatively affect the industry’s outlook.

EVs to shape future market

Another significant factor that will shape the sector is the growing adoption of electric vehicles (EVs).

With many countries or blocs – the EU foremost among them – implementing more stringent emissions standards, the demand for EVs is expected to surge in the coming years.

This trend was demonstrated by the success of US electric car giant Tesla, which registered a 38.7% increase in vehicle production last year, despite the fall in global automotive activity.

Related: Oil Majors Poised To Make Biggest Geothermal Investments In 30 Years

There is a concern that carmakers operating in emerging markets could fall behind market leaders if they do not adapt to growing EV demand and update their industrial infrastructure.

To this end, in November Thailand’s government announced a series of incentives designed to stimulate EV investment in the country and position it as a center for battery-powered vehicles in the region.

The measures include a three-year tax holiday for plug-in hybrid vehicle manufacturers and an eight-year tax waiver for those producing battery-powered EVs.

Elsewhere in South-east Asia, Indonesia is aiming to become a central part of the global EV supply chain, supported by its plentiful supplies of nickel, which is widely used in EV batteries. 

In late 2020 Indonesia's government announced plans to create a state-owned battery holding company, which is expected to develop an end-to-end domestic supply chain for EV batteries,

To support the growth of this nascent ecosystem, Indonesian policymakers are also seeking to entice more multinational vehicle manufacturers to enter the market – a goal supported by the 2020 passage of the Omnibus Law on Job Creation, which cuts red tape and improves the ease of doing business

By establishing themselves as a key component of this global sunrise industry, emerging markets should reap the benefits of long-term, sustainable growth in a sector that promises environmental as well as economic benefits. 

By Oxford Business Group 

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News