21st September 2015
As the Chinese economy slows there was concern that the global motor industry could go into recession. China accounts for 26.4% of worldwide vehicle production and are the world’s largest purchaser of vehicles at just under 20 million a year. No doubt if the Chinese economy collapses, major car companies could face a difficult time. Jaguar Land Rover has invested heavily in the Chinese market with recent investment in car plants totalled at £1.1bn, however recently they have seen a steep fall in sales of 29% for the first 8 months of 2015.
Europe is emerging stronger in the post recession period as August 2015 marks the 24th month of continuous car industry growth. New car registrations rose 11.5% in August compared with the same period last year. Growth is expected to continue into 2016 with Carlos Ghosn, chief executive of France’s Renault SA, expecting a 2% increase for the entirety of 2016.
There still remains pessimism amongst industry leaders surrounding the actual strength of the market in Europe and the overall numbers disguising the fragile health of car purchases. The UK market is dominated by dealerships purchasing new cars which warp the sales figures for the actual number of consumer bought vehicles. Of all the European countries it’s the weaker economies that are experiencing the highest growth. Spain, Italy and Portugal are all experiencing a high increase in the demand of smaller hatchback cars which thrive in urban markets.
Despite Europe’s strong performance many large motoring firms are still losing money in the continent. The saving grace for companies such as Ford, is the resilient market of the USA. The country has seen a reliable and meteoric rise in sales over the past few years compared against the rest of the world. Motor sales in August were up 300,000 from August last year. The reason for the US growth outstretching its European counterparts is mostly down the type of vehicle sold. In Europe demand for smaller, economical and affordable cars results in firms having smaller profit margins, meanwhile, the US market demands larger SUV and pickups which typically sell for a much higher price.
Whilst the effects on the average UK car owners will be relatively unnoticed for now it could result in a rise in price for future models. Car manufacturers looking to turn a profit in 2016 know they have to begin to steer consumers to the more expensive model lines. Ultimately if the buyer’s market does not shift, it could force the hand of manufactures to increase the price of small hatchbacks.
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