In 1980, about 83% of auto sales globally were generated by North America and Europe. By 2009, the sales had fallen down to 51%. By 2020, sales are expected to further go down to 35%. Asia, which is the driving force behind this shift in sales, would be accountable for about 65% of auto sales globally by 2020. This shift from West-East is evidence enough the way in which market structure has been redefined. With the emerging Chinese market seen to be the largest in car manufacturing, changes seem to be triggered and are already visible.
Michael Dunne, President of Dunne & Co, an investment advisory business firm based in Hong Kong that studies Asian markets tells that China would have more capacity in the coming years and would be pushing exports to upcoming markets. He says the main challenge for Indian makers would be to find strategies in reducing costs. Dunne goes on to speak the future of auto industry globally.
Dunne says that not many people have realised the fact that the world’s focus in automobile markets and production has indeed transferred to Asia. Four countries namely Korea, Japan, India and China are producing and selling more than 30 million automobiles. So, in Asia alone, it can be said that around 35 million cars or plus are sold and that sales is far more than what Europe and US are achieving. He says there is a lot of competition and all manufacturers are trying to grow stronger in the auto market globally. He feels as these changes are taking place, Asia would further have to heed to demands in fuel, environmental concerns and national security. He says a steady shift must be focussed on smaller cars that are fuel efficient and more emphasis on alternative energy must be given.
Dunne says China would exceed its capacity by 2015, and would be looking at selling 40 million trucks and cars. He says demand for Chinese products would absorb around 25 to 30 million. They would try to push exports to upcoming markets, which this year, is already up to 50%. In 2011, China would be exporting around 0.5 million vehicles, which by 2015, should rise to 2 to 3 million.
Dunne tells companies in China believe in shooting first and then aiming at the target whereas Indian manufacturers’ approach is strategically strong. As told previously, he believes Indian firms should implement strategies in reducing overall costs and that would be a challenge for them.
Dunne elaborates the main issue is not about the size of the car, but fuel efficiency in new engines of the future cars. Customers are indeed looking for comfort and space. Companies that can produce roomy cars with small and less fuel consuming engines surely have the edge on other manufacturers. He feels China’s car culture has progressed a lot in a short time of 10 years. He says consumers in China are buying cars like crazy and willing to cash in plenty of money when going for a car, and about 90% of the sales are settled by paying cash. China is accountable for half of Audi 6 sales globally and the largest buyer of Mercedes S Class. He feels Indian consumers still consider cars to be practical tools. Dunne concludes saying that different cultures adopted in the car market explains why the Chinese market is six folds bigger than India.