U.S., China to provide world's auto-sales growth, analyst says
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DETROIT -- U.S. and China auto sales will improve for 2012, but little growth is expected in Europe or elsewhere in the world, a top industry analyst told the Automotive News World Congress today.
U.S. auto sales, after rising 10 percent to 12.8 million vehicles last year, are expected to rise another 5 percent in 2012, said Adam Jonas, head of the global auto research team at Morgan Stanley.
He said pent-up demand, an explosion of new U.S. models, and improved operating structures at auto companies will help the industry boost sales.
"Products suffered enormously from automakers' inability to take risks," he said. "They became quite good at cranking out perfect mediocrity. There's no structural excuse for this anymore."
Jonas, 37, said pent-up demand in the United States has been caused by motorists keeping their cars longer than before, with cars on the road averaging 11.2 years old. Consumers also have been grappling with credit availability the last few years, he added.
China growth slowing
The China market also is expected to grow, he said, but auto demand there is decelerating rapidly. Falling real estate prices, lower stock prices, increased taxes on engines larger than 2 liters in displacement, and taxes on U.S. vehicles imported into China will mean lower demand there, he said.
China sales still are expected to grow by over 10 percent in 2012, but it will not be profitable growth due to overcapacity among automakers, he said.
"Chinese capacity is set to grow two times as fast as demand in 2012 and will also outpace demand significantly in 2013," he said. "This market is quickly moving into one that was undersupplied for much of the last five years to one where it can be in a situation of significant excess supply in the years ahead. This is contributing to putting pressure on prices."
Brazil, one of the world's most profitable car markets in the last few years, will see sales fall 3 to 5 percent due to slowing demand and out-of-control capacity, Jonas said.
Slow EV growth
Jonas noted that 3.4 percent of U.S. gross domestic product is spent on gasoline, up from 2.9 percent in 1970. But that rise in households' gasoline bills won't prompt a sudden shift to alternative powerplants.
Electric vehicles will only reach 5 percent of the global car market by 2025, from less than 1 percent today, because of fairly poor performance from current electric vehicles currently.
He also blamed the prospect for sluggish EV sales on the long payback period for motorists to recoup the vehicles' higher price from their savings on reduced gasoline use.
"EVs just don't make a lot of economic sense today," he said. "They make a lot of emotional sense to some people out there, but it's going to take years before the payback period can unleash the EV penetration to the masses," he said.
The payback period on electric vehicles is now about 10 years with current fuel prices and battery costs, but it needs to be at two years, he said. For that to happen, he said, battery prices would need to fall 60 percent and gasoline prices would have to double.
You can reach Ellen Mitchell at emitchell@crain.com.
