China, the global auto industry’s best hope

AFP: At a time when Indian, Russian and Brazilian car markets are stumbling, China remains the major growth engine for the global automotive industry, analysts say.

“For many years it’s been the BRIC nations (Brazil, Russia, India and China) which have accounted for the growth of global sales, taking over from the more mature markets,” explains Carlos da Silva, an analyst at IHS Automotive.

Global automobile sales should still grow by three percent this year, according to the Paris-based International Organisation of Motor Vehicle Manufacturers (OICA), a trade body representing car manufacturers.

But not all four Bric countries are expected to see their car markets grow at the same rate. Some are already declining.

Sales of new cars in Russia, for instance, are expected to fall by around seven percent this year to 2.7 million vehicles, predicts IHS Automotive.

In India -- hit by a triple whammy of high interest rates, a sharp economic slowdown and rising fuel costs -- car sales are expected to contract for the second year in a row after a decade of uninterrupted growth.

Sales in Brazil are expected to remain stable at around 3.6 million cars, according to IHS.

But it is in China where analysts see the real growth potential. Despite the current slowdown in the Chinese economy, sales should continue to rise, analysts predict.

PwC expects the sale of new cars in China to double between 2012 and 2019, which would make the automobile market there “roughly the equivalent to both the European and United States combined.”

This continued buoyancy is partly down to the fact that “Chinese households have little debt” and that the minimum wage has increased on average by around 20 percent, says Julien Marcilly, head of country risk at credit insurer Coface.

In contrast, he says: “Brazil’s economic growth has mainly been driven by strong household consumption via easy credit access, which is not sustainable in the medium term.”

The Russian car market, meanwhile, has seesawed, plunging 49 percent in 2009, rebounding and then declining once more.