Global sales will hit 88.6 million in 2015, pushed by U.S. and China, IHS predicts

Global automotive sales for 2015 could hit 88.6 million vehicles, a 2.4 percent increase from 2014 that would continue a five-year growth streak, IHS Automotive said today.

China and the U.S. will lead the increase, with regions in Europe and South America in flux.

“The global market continues to move to new highs, but it’s very spotty,” George Magliano, senior principal economist at IHS Automotive, said in an interview.

Although the U.S. and Chinese markets are improving, “most of the rest of the world is struggling,” Magliano said. “Western Europe right now is only starting to come around very slowly.”

North America’s overall economic growth and improving credit conditions will continue to power global light-vehicle demand through this year, IHS said.

Regional light-vehicle sales volume in North America should hit more than 20 million units in 2015, a 2.5 percent increase from 2014.

U.S. expansion continues

IHS forecasts sales of 16.9 million vehicles in the U.S., up from 16.5 million in 2014.

“With a strong exit to 2014, and gasoline prices currently plunging, consumers may feel even more positive throughout 2015,” an IHS statement said.

U.S. light-vehicle sales will increase over the next couple of years, Magliano said.

IHS is forecasting 17.2 million deliveries in 2016 and a U.S. peak of 17.5 million in 2017.

In Canada, IHS predicts a slight sales increase to 1.88 million vehicles, up from 1.85 million in 2014. If the Canadian market performs as IHS forecasts, it will break the annual sales record it set in 2014.

Even with a slow sales start during the first half of 2014, IHS predicts that Mexico will continue the momentum it gained in the last five months of the year. Sales will climb 3 percent to 1.17 million vehicles, IHS estimates.

China’s light-vehicle sales are expected to post the most growth this year -- a 7 percent leap. The boost will land China’s sales at 25.2 million vehicles, driven by increased finance penetration, fast dealership expansion and government vehicle scrappage programs, IHS said.

China growth

IHS expects SUV sales to lead China’s gain this year, forecasting an increase in share from 26 percent in 2014 to 28 percent in 2015.

The current antitrust campaign environment, which is expected to impact premium parts and vehicle prices in China, could affect relationships among consumers, dealers and automakers, IHS said.

“Coupled with this, the momentum could lead to downward adjustment in premium pricing, which helps provide solid foundation for premium vehicle penetration to further increase in China in the next decade,” the statement said.

IHS predicts that premium vehicles in China will rise to more than 2 million units in 2015, a 15 percent increase from 2014.

India’s market also is expected to improve, after a two-year lull, because of lower interest rates and energy prices, IHS said.

European uncertainty

But the 2015 sales forecast is bleaker in Europe, where the Russian economic collapse will impact surrounding countries, potentially offsetting the benefit of plunging gas prices, IHS said.

“The size of the market contraction in Russia is the biggest wild card facing vehicle manufacturers across the European continent, if not the world, in 2015 and 2016,” Nigel Griffiths, chief automotive economist at IHS Automotive, said in a statement.

Light-vehicle sales in Western Europe still will increase 3 percent in 2015, but they could jump even more depending on the value of the euro, IHS said.

With the instability of Russian currency, prices of cars will increase. Imported vehicle prices will increase more than 20 percent, and domestic-vehicle costs also will increase by double digits, IHS said.

In Russia, “this, along with a deep recession compounded by the recent credit rating downgrades, could push the market down to just 1.8 million units; a 27 percent decline over 2014 and nearly 40 percent (1.2 million) below the market level recorded in 2012,” the statement said.

South American troubles

South America’s sales are also on the decline. After monthly sales units broke 500,000 vehicles seven times in 2013, South America’s automotive demand dipped 10 percent in 2014.

In 2014, “Politics [impaired] Argentina and Venezuela, and the economic climate [weighed] down markets like Brazil, Chile and Peru, where it may take at a few years for demand to recover to previous highs,” the statement said.

IHS forecasts 500,000 vehicles sold in Argentina during 2015 and 3.25 million sold in Brazil. In Chile, IHS predicts 300,000 sales.

In Venezuela, the government’s access to foreign currency will be limited as oil prices plunge, which will weaken vehicle production, IHS said.

But setbacks in Russia and South America would affect neighboring regions only. They’re “not big enough to trigger a global recession or derail a global auto recovery,” Magliano said.

Exchange rate movements, price changes and oil prices will be determining factors for global automotive sales in 2015, IHS said.

Commodity and raw material price changes and low fuel prices, “will be significant tailwinds for the auto sector, its margins and for most of the world consumers, but at the same time, their unpredictability will mean long-term business plans will likely change at a more cautious pace,” the statement said.