Global Automobile Demand

The global automotive industry is experiencing a great transformation. The dynamic of global automobile demand is shifting from the mature economies of the West to the emerging economies. The phenomenon is recent. In 2005, around 20 million vehicle units¹ were sold in Asia, Oceania and the Middle East,² as much as in North America,³ and more than in Europe.⁴ This itself is a milestone because North America and Europe used to dominate the global market outrageously, with more than 70% of global vehicle sales until the end of the 1900s. In 2013, Asia sold 40 million new vehicles, more than twice the sales in North America (18.7 millions) and Europe (14 millions). It means that Europe and North America now account for only 43% of global sales, less than Asia (47%).⁵ This is another spectacular illustration of the shift of wealth towards Asia and the advent of a multipolar world. Of course, much of the shift owes to China rise. The Chinese automobile market is now the biggest in the world. But if we exclude China, Asia still has a market of more than 18 million units, the same size as the North American market in 2013, and four million units greater than the European market. And if we also exclude Japan, Asia still enjoys vehicles sales of around 13 million units, about the same size as the European market. This is because many economies have emerged and now have a middle class, which buys automobiles.

Between December 2007 and June 2009, the US economy was hit by the “Great Recession”, the worst economic crisis since the Great Depression of the 1930s. As a consequence, the US automobile industry has gone through a crisis of unrivalled magnitude: during the recession, light-vehicle sales lost 6 million units and two of the “Big Three” automakers — GM and Chrysler — went bankrupt. Since then, the US economy has recovered progressively and the automobile market is bouncing back to its pre-recession level. In fact, the automobile industry has better recovered than the rest of the economy, the growth of which is weak and uncertain. GM and Chrysler emerged from bankruptcy as new slimmeddown companies with fewer brands, plants and workers, and less debt and market share. The rejuvenated Big Three returned to profit in 2009 (Ford) or 2010 (GM and Chrysler) when the US market was still below 12 million vehicles sales a year. These companies are making bigger profits now that the market is expanding again and are on the way to reaching 16 million units in the near future. GM and Chrysler have repaid their loans and have gone public again, a move that has given the US government a way to sell part of its stake in the companies’ stock.

From a comparative perspective, the United Kingdom has become a very unusual automobile country. On the one hand, its domestic market for new cars was second in Europe only to Germany and Italy before the 2008–2009 crisis, and in 2011, it was still the third largest European market behind Germany and France. Yet, despite the fact that the UK was historically home to a very significant automobile industry, this is a market that is now completely controlled by foreign importers, whose sales during the 2000s have accounted on average for more than 80% of the total (88.7% in 2011).

Since 2008, the European car crisis has been presented as a consequence of significant manufacturing overcapacity. This overcapacity was linked, on the one hand, to the arrival of new entrants who built factories to produce automobiles close to their new markets and, on the other, to the stagnation and decline of saturated and hyper-competitive European markets. Certain automobile manufacturers have sought to adapt by reducing manufacturing capacity in high-wage countries while maintaining or developing their output in Central and European countries that pay lower salaries. The automobile output of new member states has been growing significantly over the past 15 years (Jullien & Pardi, 2013), and capacity has been added more recently in Turkey, Morocco and Serbia. France and Italy have been particularly impacted by this move to lower cost countries (Jullien & Lung, 2011). France, for example, still manufactured 2.88 million vehicles in 2000, but only 1.46 in 2013 (CCFA, 2014).

In the last 10 years, the gap between the rich and the poor in Germany has widened. Incomes polarise to the margins, and the middle-income group gets smaller. Increasing income inequality has important influence on the population’s real and perceived quality of life and participation in society at large. Since 2001, at the mid-term of each electoral period, the German government issues a report on the living conditions of the poor and rich. The forth and most recent report, issued in January 2013, confirmed existing trends: a wider distribution of incomes among the rich and the poor; increasing low-income jobs, as more than 4 million people earn less than 7 Euro pre-tax an hour; a higher risk of poverty in general. Poor people thus tend to remain in the weakest income group (Bundesregierung, 2013). This alarming finding has been a highly political issue, as the government tried to conceal its significance in an earlier version of the report, published in 2012 (Sueddeutsche Zeitung, 28 November 2012).

Spain is one of the most prominent victims of the global economic crisis following the subprime crash in 2007. The international financial crash coincided with the homemade real estate bubble, and after 14 years of growth, it caused the deepest economic downturn in democratic Spain. The present chapter starts with a general overview of the main characteristics and recent trends in Spain’s automotive sector. The second section outlines the automotive policies which always had significant impacts on the development of the sector and currently attempt to promote e-mobility. The following part provides a detailed look at the automobile demand structure and its relation to income and wealth distribution. We conclude with some reflections on the structural changes and future prospects of car markets in Spain.

This chapter will investigate developments in the Japanese automobile market with regard to changing social and economic conditions over the last two or three decades. The research question is whether, and if yes, how the traditional national pattern of income distribution has changed, and how these changes influenced the market for automobiles. In particular, this chapter will examine what influence the financial crisis of 2008 had on Japan’s automobile market. However, more than in any other market and industry, developments in the automobile sector are determined by legal regulations in reaction to new social, environmental or safety requirements, by technical innovations, and by changing individual and collective attitudes and value perceptions towards cars, mobility and the modern lifestyle. Often in times of economic changes or crises, these factors coincide and accelerate development trends in the industry and the market. This has happened in the past, and there are signs that the financial crisis of 2008 might have boosted development of ecological cars and sustainable mobility, especially in Japan.¹

There is no doubt that the automobile industry is going through a fundamental shift. The “Great Recession” triggered by the “subprime crisis” has affected worldwide automobile demand and prompted automobile manufacturers to form alliances and shift their focus and concentration to the emerging market, which has withstood the slump amid economic growth and government subsidies. In a context of weak global demand, major markets will see harsher price competition as key players take an aggressive stance for larger market shares. Hence, automakers will compete more fiercely than ever before for more sales and will have to fight on two major fronts: to gain a larger market share and to maintain profitability. As a result of recession, income disparity widens, as does the spending gap, triggering fears of social instability. This change in spending patterns show evidence of a “middle class squeeze”, with reflects in a stagnation of mid-range cars and an increase of the top and low range cars demand. After an expansion phase, the Korean market growth has stagnated, as the national economy remained sluggish.

Despite the differences between the various mature economies analysed in this volume, some common lessons can be drawn.