Q1 showed little sign of improvement in the world’s second-tier auto markets – Brazil, Russia, India, Japan. In total, their sales used to equal those of the EU, the world’s 3rd largest market. But Q1 volumes saw a 16% decline versus 2014 levels, as the chart shows:
- Japan’s sales were boosted in 2014 (blue column) by buying ahead of April’s VAT rise. By now, premier Abe’s Abenomics strategy should have seen them moving higher again. But instead they were down 16% at 1.3m (red)
- Russia’s sales were simply awful, hit by the combination of the oil price and rouble’s collapse, and sanctions related to Ukraine. They were down 36% at only 0.4m, with March sales down an astonishing 43%
- Brazil was also very disappointing, with sales down 17% at 0.7m. Its economy should be buoyant, with the Olympics due next year, but most forecasts now expect it to remain in recession
- But India did see growth, with sales up 5% at 0.7m. And encouragingly, sales for India’s fiscal year April 2014-March 2015 also showed a 5% rise, after 2 years of decline, although they are still well below 2012′s peak levels
China is no longer buying commodities in vast quantities and at high prices from Brazil and Russia. And Japan’s attempt to devalue its way into growth, despite its demographic deficit, is now clearly failing.
So far, therefore, there is little change from the underlying position in these important markets since February. Japan’s sales seem likely to remain slow, especially if it returns to deflation, and Brazil’s sales also seem likely to continue to struggle. Russia is confirming the warning of a likely “bloodbath” from Renault/Nissan head Carlos Ghosn last December.
India could hold the most long-term promise, but sustainable increases in sales require concrete action by Premier Modi to improve basic living conditions and infrastructure. And interestingly, developments in Ford’s strategy for India now confirm our analysis in chapter 8 of Boom, Gloom and the New Normal when we wrote:
“Ford believes increased affordability is the key to meeting its goal of boosting global sales volumes by 50% by 2015. It has therefore developed a new 1 liter version of the Ecosport for sale in low-cost markets, and will manufacture it in India.”
As the Wall Street Journal noted last month:
“International brands such as Hyundai , Suzuki , Nissan, Volkswagen and Ford are now exporting hundreds of thousands of cars from India. In fact, in terms of passenger cars, India already exports more than China.
“Companies in India have seen their passenger-car exports jump more than 60% in the last five years to a total of more than 620k in 2014. China trailed with 533k auto exports last year. Other countries like Japan, Korea and even Thailand exported more last year, but India is expected to start catching up.”
This decision to focus Indian production on the export rather than domestic market highlights the end of the 2009/10 euphoria around the Incredible India concept. This led to the widespread belief that India was somehow about to become ‘middle-class’ with incomes reaching Western levels.
Reality remains somewhat different, with average incomes in India still only around $1500/year.