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The Auto Industry Is on a Recovery Spree

April 23, 2014 | About:

The automobile market recovered significantly in 2013 from the impact of the global financial crisis, buoyed by economic recovery and pent-up demand in the U.S. and Asia. 2013 was a good year for the auto industry. Global auto sales have crossed the 80 million vehicles threshold for the first time in the past year.

A total of 82.84 million vehicles were sold last year, representing a 4.2% increase over 2012. In the U.S., auto sales increased 7.6% to 15.6 million, while China, the world's fastest growing auto market, sold over 21 million vehicles. In contrast, Western Europe posted another annual decline, but is expected to grow this year.

The Case with the Different Companies

Automobile manufacturers and dealers saw a rebound in auto sales in 2013, and predict 2014 will be another banner year for the industry. “We’re anticipating a better year than last year which was the best year since the great (2009) depression,” says Mike Webb, owner of Webb Ford in Highland and three other automobile dealerships.

After spiking to almost 17 million in 2007, vehicle sales dropped to 10.4 million in 2009. By 2013, there were 16.4 million new cars and light trucks bought or leased nationwide, an 8 percent increase from the previous year.

Japanese automaker Toyota Motor Corp. (NYSE:TM) retained its market leading position in terms of global sales volume and sold 9.98 million vehicles during the year, up 2% over 2012 level. General Motors Company (NYSE:GM) and Volkswagen AG (VLKAY) occupied the second and third positions, with sales volumes of 9.71 million and 9.7 million vehicles, respectively.

General Motors was the leading automaker in the U.S. in 2013 with annual sales of 2.8 million units. Ford Motor Co. (NYSE:F) came in second with 2.5 million units, while Toyota slipped into the third position with registered sales of 2.2 million units.

Ford (NYSE:F) brand 2013 retail sales increased 14 percent in 2013, with cars sales 12 percent higher, utility vehicles up 13 percent and truck sales increasing 17 percent, according to the company. In 2013, Ford was the best-selling brand for the fourth consecutive year.

Toyota Europe expects to sell 865,000 units this year and increase its market share to 4.8 percent as the European car market enters what is expected to be a slow recovery from six years of contraction.

Didier Leroy, the head of Toyota Europe, told reporters that hybrid cars have been attracting new customers with the addition of the smaller Yaris hybrid and sportier Auris, beyond the original Prius models.

Soaring Expectations

Imagine a market that is set to grow at a CAGR of over 30% for the next five years, and to reach over $130 billion. This is the forecast for the connected car market, and these numbers are looking more and more achievable.

“Consumers will be far better off in 2014 than last year,” says Steven Szakaly, chief economist for the National Automotive Dealers Association. “Employment is improving. Debt has been reduced, and home prices across all regions of the country will remain stable or will rise, yielding a positive wealth effect.”

In 2014, earnings are expected to surge 11%, again putting it among the best performing sectors. However, revenue growth in 2014 is expected to be a modest 2.7%.

Like 2013, 2014 is also expected to be a good year for automakers. Across the globe, countries are beginning to recover from the financial crisis, grow GDP and invest in infrastructure. Furthermore, banks are offering more car loans with lower interest rates. Consumers are taking advantage of low lease rates and inexpensive financing, which continues a shift from buying used to buying new.

High Opportunities in Asia

The Asian countries, especially China and India, are expected to account for 40% of growth in the auto industry over the next five to seven years. China is the biggest and fastest growing auto market in the world in terms of number of vehicles sold. In 2013, it became the first nation to surpass domestic sales of 20 million units.

Ford expects sustainable growth moving forward in China. To keep up with market demand, Ford together with its partners currently added four new plants in China. For much of the past decade Ford has trailed Japan's big car makers, but a line-up of new and revamped vehicles, including the top-selling Focus, and a China-Japan territorial spat helped the U.S. company in 2013.

Ford is building 14 new factories as part of a global expansion that began in 2011 in countries like China and India. A new plant in the eastern city of Hangzhou that cost $760 million will have the capacity to build 250,000 vehicles annually and will open next year.

China is the world's largest and fastest growing auto market. As per a recent study conducted by the KPMG, the Chinese market will continue to expand considerably, and it is expected to account for 30% of global automotive sales by 2020 alone.

China leads the world automotive market followed by the U.S. and Japan. India, which currently is the sixth largest automobile market, will account for more than 5% of the global vehicle sales by 2016, IHS said.

India will also become the world’s fourth largest producer of automobiles by 2020, after China, the U.S. and Japan, it said.

The positive forecast comes as India’s auto sector is going through a prolonged slowdown with firms cutting production and laying off staff.

Bottom Line

The auto industry finished 2013 with more sales, more jobs and big expansion plans, solidifying its key role in the economic recovery. Car companies and parts manufacturers have added more than 173,000 jobs over the last four years and now employ more than 826,000 workers in the U.S., according to federal jobs reports. That’s still down from the 1.1 million before the recession, but it represents vital growth, economists said.

It was the industry’s best year since 2007. The Great Recession drove U.S. auto sales to a low of 10.4 million vehicles sold in 2009, but the industry has rocketed back since, to 15.6 million sold last year.

Ford Motor Co. said it will add more than 5,000 U.S. jobs this year — including 3,300 salaried positions. It is also pouring more than $1 billion into its Kansas City, Mo.-area plant to retool and expand the factory.

Rating: 5.0/5 (1 vote)



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