18 February 2019

Auto 2019 - exciting and volatile times ahead

Now that we have passed what I think of as the happy and carefree calendar point of the Spring - Valentines Day - it seems a good time to consider the global picture of automotive in 2019.

While many of our subscribers may believe they are insulated from the influence of the market in China, the region’s sales and products are to be found in every sector of global automotive, so its behaviour does impact us all.

China is of course the world's largest car market and this fact often causes some complacency for OEMs and suppliers - after all, a market of 28 million vehicles sales per year should mean all players are insulated from sharp declines or rises but along with the size of the market comes the almost instant movements in the region; the Chinese psyche, in politics and business, is not hampered by bureaucratic layers that take time to pass laws, and changes in consumer behaviour can occur almost overnight.

In the so-called tier 2 and tier 3 cities, a period of sustained growth has started to slow and this is particularly concerning as these relatively smaller cities - albeit with 15-35 million inhabitants - had taken over as fruitful sales territories since Beijing and Shanghai have reached levels of vehicle parc saturation, and the major conurbations have seen some legislative clampdowns on vehicle usage, to try and solve the growing problems of congestion and pollution.

Elsewhere we have the much-reported and discussed Brexit issue which has prompted several key OEM transplants in the UK to forecast severe supply problems which have led them to cancel new vehicles - the Nissan X-Trail won’t be coming to the brand’s Sunderland plant - and cut working hours and indeed shutter some plants in the UK. As I have written previously, even a ‘no-deal’ exit from the EU will force all concerned to work under WTO rules, a system that does work well in other regions such as between China and Japan but moving to that cross-border model and maintaining effective just-in-time deliveries of components will take considerable planning.

The sales and production picture in the US looks healthy, the domestic OEms are closing some plants but the once expected mass exit of jobs to low cost countries has not continued or grown, partly due to the hard work and quality of the US workforce but also due to President Trump’s administration’s various threats of tariffs on imported vehicles.

The latest of these is the news that the US could be about to impose new higher tariffs on cars imported from the EU. This will mainly affect German-based manufacturers and several of these OEMs have large and flexible production centres in North America already.

Coming back to the observation that the global automotive industry is such a large lumbering giant that no changes will greatly affect its health, the last year has shown that as markets have expanded into new territories such as China, we can take nothing for granted and the rise of EVs and connected and autonomous vehicles may well be the catalyst for a new world order of automotive production.

As always in our industry, there are exciting and perhaps alarming times ahead!

Simon Duval Smith

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