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TRANSCRIPT
© 2015 IHS
Presentation
ihs.com
IHS AUTOMOTIVE
The Outlook for the Global Economy and
Automotive Demand IHS Automotive Customer Briefing – Frankfurt | 17 June 2015
Tim Armstrong, VP Forecast Planning IHS Automotive
© 2015 IHS
World Light Vehicle Selling Rates Low oil will help weak global market; China remains the key to industry growth
World
World Without
China
Source: IHS Automotive Analysis, monthly data with X12 Seasonal Adjustment
Global market, without
China, finally back to
pre-recession levels
2
LV
Sa
les
SA
AR
, M
illio
ns S
old
© 2015 IHS
The “Great Divergence”
• Over the past four years global growth has been remarkably stable –
between 2.5% and 3.0%
• However, the composition of growth has changed fundamentally – with
a gradual growth acceleration among the advance economies and a
sharp deceleration in the emerging world
• Four trends have driven this divergence:
• Debt and deleveraging
• The plunge in the price of oil and other commodities
• Central banks moving on different paths
• The rise of the dollar and the fall in other currencies
3
© 2015 IHS
Implications
• The net effect of the “Great Divergence” is that the momentum of the
global economy will improve modestly in the second half of 2015 and in
2016
• Better prospects will be the result of solid growth in the US and a slight
pickup in the pace of Eurozone and Japanese economic activity
• The plunge in oil prices will add 0.3 to 0.5 percentage point to global
growth over the coming year
• More stimulus by the Bank of Japan, People’s Bank of China and the
European Central bank will also support growth
• A stronger dollar is a lifeline to Europe and Japan, but is a challenge to
many emerging markets – and US exporters
• China’s growth will slow further, and for other large emerging markets it
will be a good news (India), bad news (Brazil and Russia) story
4
© 2015 IHS
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1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
Perc
en
t ch
an
ge
World Advanced countries Emerging markets
Global real GDP growth: divergent paths
Real GDP
Source: IHS © 2015 IHS
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© 2015 IHS
-1
0
1
2
3
4
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6
7
NAFTA OtherAmericas
WesternEurope
EmergingEurope
Mideast-N. Africa
Sub-Saharan
Africa
Japan OtherAsia-
Pacific
An
nu
al
perc
en
t ch
an
ge
2013 2014 2015 2016 2017-21
Asia-Pacific (excluding Japan) and Sub-Saharan Africa
will achieve the fastest growth in real GDP
Real GDP
Source: IHS © 2015 IHS
6
© 2015 IHS
Oil and other commodity prices have tumbled in
response to structural excess supply
• Rising production and weak demand growth have left the global oil
market oversupplied, driving down prices
• A mismatch between fundamentals, on the one hand, and financial
market expectations and inventory building, on the other, caused the
recent price rally – this may not last
• As oil production growth slows in the second half of 2015, prices will
begin to recover
• IHS expects the price of Dated Brent crude oil to average $59 in 2015
and $66 in 2016
• Big difference: the US is now a swing producer – driven by market
forces
• Other commodity prices have fallen mostly because of weak demand
from and excess capacity in China
7
© 2015 IHS
US crude oil prices: A big drop – but for how long?
Crude oil and natural gas prices
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2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Do
llars
/millio
n B
tu
Do
lla
rs/b
arr
el
Crude oil, WTI (Left scale) Natural gas, Henry Hub (Right scale)
Source: IHS Energy © 2015 IHS
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© 2015 IHS
Winners and losers from low oil prices
• Winners:
• US consumers are the biggest winners – especially low-income families
• European consumers benefit proportionally less because of high gasoline taxes
• Emerging-market consumers will also benefit less because of large fuel subsidies
• Energy-intensive industries, such as agriculture and transportation
• Governments in oil-importing countries with large fuel subsidies
• Losers:
• Oil producers, especially those with high costs
• Major oil exporters, especially those at a “fiscal break-even point” above USD100 per
barrel such as Iran, Russia, Venezuela, Ecuador, and Angola
• Net effect:
• In the United States and worldwide, the net effect on consumers and producers is
positive, boosting real GDP growth by roughly between 0.3 and 0.5 percentage point
in late 2015 and 2016
• A 40% drop in oil prices represents a transfer of about USD1.4 trillion from oil
exporters to oil importers—the latter have a higher marginal propensity to spend than
the former
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© 2015 IHS
0
1
2
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Perc
en
t, e
nd
of
qu
art
er
United States Eurozone Japan United Kingdom
11
The US Federal Reserve will lead in raising policy
interest rates, followed by the Bank of England
Policy interest rates
Source: IHS © 2015 IHS
© 2015 IHS 12
The dollar: Rising but still competitive
Real trade-weighted dollar index
0,6
0,8
1,0
1,2
1,4
1,6
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
Ind
ex,
2009 =
1.0
Major trading partners Other important trading partners
© 2015 IHS
IHS expects the Euro/$ rate to strengthen again, moving
back to its long(er) term trend-value
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0,8
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Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15 Jan 17 Jan 19 Jan 21 Jan 23 Jan 25
History Forecast
© 2015 IHS
US real GDP growth and the unemployment rate: ignore
the first quarter data
Real GDP and unemployment
4,0
5,2
6,4
7,6
8,8
10,0
-9
-6
-3
0
3
6
2006 2008 2010 2012 2014 2016
Perc
en
t
An
nu
al
perc
en
t ch
an
ge
Real GDP growth (Left scale) Unemployment rate (Right scale)
Source: IHS © 2015 IHS
15
© 2015 IHS
The Eurozone recovery looks a little stronger; and UK
growth remains robust
• Growth will be better in 2015 (1.5%) thanks to lower oil prices, a weak euro,
reduced fiscal headwinds, and an accommodative monetary policy – but slow
progress on deleveraging is a problem
• A weak euro has helped exporters, but reduced the purchasing power of
consumers
• The ECB’s QE program has already led to easing credit conditions – even
Greek bond yields remain relatively low (compared with 2011/12)
• While the risks of a Greek exit are still elevated, the contagion effects will
probably be small
• Low inflation and (very) gradually improving labor market conditions will support
consumer spending, especially in Northern Europe
• Stronger export growth and growing pent-up demand boost capital spending
• Meanwhile (much like the US), UK growth will be solid (around 2.5%) – the
strong election results will help
16
© 2015 IHS
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-1
0
1
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3
Germany United Kingdom France Italy Spain
An
nu
al
perc
en
t ch
an
ge
2013 2014 2015 2016 2017-21
Real GDP growth in Western Europe
Real GDP
Source: IHS © 2015 IHS
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© 2015 IHS 21
Can Greece de-stabilise Europe?
• Greece’s real GDP growth was
beginning to recover …
• … And public finances were
headed in the right direction
• The renewed uncertainty
discourages investment and
caused a further tightening of
credit conditions
• The spill-over effects of a Grexit
on the rest of Europe will be
limited …
• … if there is no contagion to
Spain, Portugal and Italy
-12-10
-8-6-4-202468
Greece real GDP, %chya
-20%
-15%
-10%
-5%
0%
5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
201
3
2014
201
5
Govt balance as a share of GDP
Primary surplus as a share of GDP
Government balance as a share of GDP, %
© 2015 IHS 22
Financial contagion is unlikely
EFSF EU Bilateral Loans Bonds (ECB/NCB)
Bonds (No-ECB) IMF Other
Most of Greece’s public debt is
held by the official lenders
Manufacturing
13,3% Tradeable services 10,1%
Non-tradeable services 76,6%
Manufacturing only accounts for 13.3% of
Greece’s Value Added. Tradeable
services account for another 10%
© 2015 IHS
Should Greece exit the Eurozone, its economy would fall
back for another 4 years before partly recovering – Real GDP
23
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2007 2009 2011 2013 2015 2017 2019 2021
Baseline
Grexit
© 2015 IHS
The impact on Europe and the world depends on the
reaction of financial markets and the Euro/$ rate
24
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1,0
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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Baseline
Grexit
Greece Exit With Contagion
© 2015 IHS
China’s growth rate will decelerate more
• The recent deceleration in the Chinese economy is due mostly to weak
domestic demand (because of the real estate bust)
• The government is trying to balance concerns about weak jobs growth and
social unrest with its desire to tackle the glut of debt and industrial over-
capacity in the Chinese economy – although it is providing modest stimulus and
has lowered the target growth rate from 7.5% to 7.0%
• Since November, the People’s Bank of China has cut interest rates three times
and reduced the required reserve ratio – but real interest rates are still high and
the PBoC will likely ease more again
• Lower borrowing costs and the new debt swap program will help ease debt
servicing costs but have done nothing to cut the stock of debt
• The vast (and growing) excess industrial capacity in China, financed by an
explosion of debt, is the biggest threat to China’s growth prospects
• Bottom line: limited support from fiscal and monetary policy will not be enough
to prevent growth from weakening further, from 7.4% in 2014 (the weakest
since 1990) to around 6.5% in 2015 and 6.3% in 2016
27
© 2015 IHS
China’s economic growth will downshift in the long run
Real GDP
Source: IHS © 2015 IHS
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© 2015 IHS
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`04 `05 `06 `07 `08 `09 `10 `11 `12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25
Millio
ns
Apr 14
Apr 15
1.5 million unit
downgrade in
2015
30
Long term forecast has been lowered by around 2.3% on average
Global Light Vehicle Sales: How did the forecast change? Downgrade builds across forecast
Lig
ht V
ehic
le S
ale
s
Vol % Chg
2014 86.3 3.5%
2015 87.5 1.4%
2016 90.7 3.6%
Mismatch with the cheap oil
price environment !
Although mature markets
have been upgraded in line
they cannot offset the big
corrections in Russia and
Brazil.
2.39 m unit forecast
downgrade in 2021
By early 2020’s World
GDP is approx. $2
trillion smaller than we
forecast one year ago
- Impacting autos
growth path via a lower
long term motorisation
and resulting annual
auto sales volume
© 2015 IHS
Consumer boon from low oil is being more than offset by
downgraded economic performance in the BRICs
-2000000
-1500000
-1000000
-500000
0
500000
2015 2016 2017 2018 2019 2020 2021 2022
China
India
Russia
Brazil
WE
US
Forecast changes to LV sales volume over the last 6 months (March 2015 vs Sept 2014) –
i.e. the period of the oil price collapse
© 2015 IHS
80
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85
86
87
88
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90
86.3
Million
+1.4%
Sa
les in
Mill
ion
s
87.5
Million
Global Light Vehicle Sales (IHS Total Market for LV’s) 2015 Outlook by Region
1.63m 493k
475k 420k 33k
-24k -145k -228k
-784k
+6.9%
+3.6%
+3% +5%
-3% -9%
-23%
© 2015 IHS
1.8% 3.6%
-40%
-30%
-20%
-10%
0%
10%
20%S
pa
in
Tu
rkey
Th
aila
nd
India
Chin
a
Mexic
o
Italy
Ira
n
Mala
ysia
Germ
any
UK
Fra
nce
US
A
Can
ada
World
Indo
nesia
Au
str
alia
South
Afr
ica
South
Ko
rea
Sau
di A
rabia
Japan
Bra
zil
Russia
2015 2016
Fo
rec
as
ted
Ch
an
ge
in
LV
Sa
les
Country Light Vehicle Sales Growth Among the largest markets, Russia/South America will have a tough year
Source: IHS Automotive 2015 and 2016 LV sales forecasts
11
© 2015 IHS
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Millio
nen
West & Central Europe – LV Sales
Gre
at R
ece
ssio
n
Eu
rozo
ne
Crisis
Pe
aks
Buyin
g P
ropensitie
s R
ebound
Em
plo
ym
ent
Fundam
enta
ls
and R
epla
cem
ent
dem
an
d
We
ak r
ep
lace
me
nt d
em
an
d –
Ech
o o
f C
risis
We
ak E
uro
pe
an
De
mo
gra
ph
ics ta
ke
ho
ld
Structural adjustments from crisis =lower long
term purchase propensities
+4.9% (15)
+5.8% (14)
The Bottom line – Europe's Auto Market Phases
© 2015 IHS
Europe Light Vehicle Sales Outlook
In April 2015, European sales reached 1.61 million units, a 1.3% y/y increase. Western and Central Europe kept a good
rhythm in April (up 7.3% y/y) while the situation in Eastern Europe kept deteriorating (down 21.9% y/y). YTD through April,
the European continent has grown 2.7% y/y, slightly decelerating over the first quarter.
Western and Central Europe seem to be on the road to recovery, up 8.5% y/y up to April. The general environment is
increasingly supportive (with, notably, quantitative easing from the European Central Bank and lesser pressure on
households’ wallets thanks to relatively low resources prices). Meanwhile, Eastern Europe remains in dire straits. Despite
the rebound in Turkey (correcting from previous tax-related distortions), the subregion is embroiled in a vicious cycle
centered on the collapsing Russian economy. The subregion was down 22.7% y/y in the first four months of the year.
Consequently, we anticipate an awkward situation in 2015 for the continent: a strong recovery in the West totally wiped out
by the effects of the Russian crisis.
0
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0,0
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Y 2
00
5
CY
2006
CY
200
7
CY
200
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200
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CY
201
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CY
201
1
CY
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2016
CY
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7
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CY
201
9
CY
202
0
Millio
nen
Millio
nen
Central Europe
East Europe
West Europe (RHD)
© 2015 IHS
Germany and France sales outlook
German sales remained solid in April, increasing
6.3% y/y. This maintained the year-to-date
performance at a satisfying level, with 6.6% y/y
growth. Tactical (dealer, rental) sales channels, a
typical feature of the German market, remain
strong (up 11%). We anticipate this situation to
continue throughout 2015, with an increase of
around 3.0–3.5% y/y.
In the longer run, despite very sound macro
factors, we confirm Germany as essentially a
replacement-only market—mostly stable and no
longer passing the 3.5-million-unit threshold on a
regular basis.
French sales decelerated neatly in April, up 3.2%
y/y. This brought the year to date below 5% y/y.
The actual potential of the market lies in the return
of private buyers (currently still very cautious). We
continue to expect this to happen in the second part
of the year (amid a better economic climate and
some product activity). In this context, we have
slightly raised our outlook for 2015 to around 2.5–
3.0% y/y.
-6,0%
-4,0%
-2,0%
0,0%
2,0%
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6,0%
8,0%
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2012 2013 2014 April 2015 YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Mil
lio
n u
nit
s
Germany sales
Germany Change
-15,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
0,0
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1,0
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2,0
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2012 2013 2014 April 2015 YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Mil
lio
n u
nit
s
France sales
France Change
© 2015 IHS
Italy and Spain sales outlook
The Italian market accelerated markedly in April,
up 23.1% y/y. The remarkable fact is that for the
second month in a row, private buyers made
strong contributions to growth (increasing 28% y/y
in April).
Italy is on the recovery track but artificial support
(discounts, incentives, etc.) is definitely a part of
the equation. We expect the current scenario to
continue into 2015, with growth of nearly 6% y/y.
Spain slowed down in April, up 4.9% y/y after
months of double-digit progressions. The YTD
gain was brought back to 25.3% y/y. The PIVE
scrapping incentive funds ended in April with
immediate consequences. Consequently, officials
confirmed the renewal of the scheme (PIVE 8) in
May for a last round that will end with the current
year. This strategy will help sustain sales and,
consequently, will improve our expectations for
full-year 2015.
-25,0%
-20,0%
-15,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
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2012 2013 2014 April 2015 YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Mil
lio
n u
nit
s
Italy sales
Italy Change
-20,0%
-15,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
0,0
200,0
400,0
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800,0
1000,0
1200,0
1400,0
2012 2013 2014 April2015
YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Th
ou
san
d u
nit
s
Spain sales
Spain Change
© 2015 IHS
UK and Russia sales outlook
Sales in the United Kingdom remained strong in
April, up 6.6% y/y (8.0% y/y for the YTD). The
market increased on robust fleet and private
demand (rising 9% and 3%, respectively).
In addition, customer confidence in April reached
its highest level since 2002. The very attractive
lease offers and incentives by OEMs also help
maintain the momentum. Nevertheless, we
anticipate some leveling off during the year as
pent-up demand should dry up. For the full year,
we currently expect growth around 3.0–3.5% y/y.
In April, the Russian market kept nose diving,
with sales down 41.5% y/y.
Consequently, our forecast for 2015 calls for a
36% y/y decline to barely 1.6 million units; by
comparison, the market reached nearly 3.0
million units in 2012.
Under our present assumptions, the Russian
market will not reach the 3-million-unit mark
before the next decade—far later than previously
envisioned.
-6,0%
-4,0%
-2,0%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2012 2013 2014 April 2015 YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Mil
lio
n u
nit
s
United Kingdom sales
United Kingdom Change
-50,0%
-40,0%
-30,0%
-20,0%
-10,0%
0,0%
10,0%
20,0%
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2012 2013 2014 April 2015 YTD 2015 2016 2017
Year-o
n-y
ear c
ha
ng
e
Mil
lio
n u
nit
s
Russia sales
Russia Change
© 2015 IHS
US: Status of Automotive Market Consumer buying desire remains high; stronger wages will improve ability
• Since August SAAR hit 17.5m units some momentum has been lost, but many positive factors
contribute to strong outlook and March’s 17.1 SAAR a modest surprise.
• The cyclical nature of autos is kicking in – growth rate slowing now as pent-up demand has now
been spent and want based demand replaces need based.
• Low oil prices will help consumer spending, and autos in particular, but oil volatility may make
consumer skeptical thus moderating potential gains.
• Housing market has much more recovery to come which will help sales through jobs and wealth.
• Transactions prices are strong, and will remain strong in the long-run.
• Manufacturing cost pressures will remain low over near-term due to weak commodity prices.
• Credit and jobs will bring the younger buyers into the showrooms.
• Auto credit availability may be slowing - lengthening loan maturity is an issue.
• The US sales forecast peaking at 17.7m units in 2017 before sales growth declines.
© 2015 IHS
8
10
12
14
16
18
20
22
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
US: Light Vehicle Sales SAAR Strong recovery since 2009, expected to continue
40
“Keep America
Rolling” “Employee Pricing
For All”
“Cash For
Clunkers”
Mo
nth
ly S
ale
s (
mill
ion
s)
Source: IHS Automotive, light vehicle sales forecast
© 2015 IHS 41
5,4%
0%
2%
4%
6%
8%
10%
12%
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
53
40
45
50
55
60
65
70
75
80
85
90
20
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20
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14
20
15
20
16
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17
20
18
20
19
20
20
20
21
20
22
New/Refresh Nameplate Counts New/Refresh Sales Market Share
US: Product Launches New/refreshed nameplates will drive showroom traffic; OEMs need products to be liked
Source: IHS Automotive, current light vehicle sales forecast
© 2015 IHS
Total Light Vehicle Sales
China 2012 - 2025 (in thousands)
Comments:
• China GDP forecast for 2015-2017 was downgraded
in line with lower acceptable government target
growth and policy
• Despite slowdown 2014 sales came in line with last
years forecast
• Slowdown in investment sectors rather than
consumer sector which has bounced up to over 52%
of GDP. Changes in components of economic
growth reflected in still strong passenger sales
• China provincial level analysis increased our long
term forecast (2020-2025) by 250k-400k units per
year using bottom up approaches which uplifted base
demand before slower economic growth rates were
pulled back – leaving net impact smaller at just -1.1%
(i.e. less than implied by simple adjustment
modeling)
• IHS expects anti-trust campaign could alter the
relationships among consumer, dealer and OEMs.
The campaign is expected to have a long lasting
effect on premium parts/vehicle prices in China.
Coupled with anti-corruption campaign, the
momentum could lead to faster downward adjustment
in premium pricing which helps provide another boost
to premium penetration to further increase in China in
the next decade. Consequently, we raised our outlook
for premium TIV by 3%-4 in the forecast horizon.
15.000
17.000
19.000
21.000
23.000
25.000
27.000
29.000
31.000
33.000
35.000
`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23
Apr 2014 FC Apr 2015 FC
China
General Market Developments
© 2015 IHS
Total Light Vehicle Sales
Russia 2012 - 2025 (in thousands)
Comments:
• 3 rounds of significant downgrade of Russian TIV in 2014
• Short-term downgrade based on underperforming
economy
• Short-, mid- and long-term downward revision due to
influence of sanctions against Russia on its economy
• Short-term downgrade owing to liquidity crisis, oil price
slump and substantial currency depreciation
• Russian stimulus program has been launched in Sep.
‘14 and is highly appreciated by consumers. The
program should end in Sept. 2015. Additionally, 3rd
round of loan subsidy program was introduced in Apr.
2015. However, their scale won’t be enough to save the
market from notable decline.
• Much slower recovery compared to the crisis in 2009 is
expected. Lack in growth of disposable incomes and
significant increase in vehicle prices together with
postponed reduction of import tariffs will not allow
market to post impressive growth rates in the near
future.
• Rebound in 2017/18 is mainly based on improving
energy prices, abolishment of sanctions and new pre-
election initiatives of the government. Replacement
demand from years 2008 and 2012 will spur Russian
sales volumes in this time frame.
• Further very strong downward potential comes from weak
currency and possible escalation of Ukrainian conflict
1.500
2.000
2.500
3.000
3.500
4.000
`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25
Apr 2014 FC Apr 2015 FC
Russia
General Market Developments
© 2015 IHS
Total Light Vehicle Sales
Brazil 2012 - 2025 (in thousands) Comments: Key Information:
• Short-term: Full IPI tax has been restored,
gasoline/ethanol prices are up and consumer
confidence is at all time low.
• Short-term: Government is focused on increasing
revenues and has removed several subsidies (IPI
being among them). April GDP for 2015 is now -0.9%
(not reflected in forecast) as SELIC is now at 12.75%
whereas consumer confidence is hitting lows.
• Medium-term: Without exports or strong consumer to
rely upon we expect weak GDP growth in the medium
term. Inflation remains stubbornly high making credit
more expensive and currency continues to devalue.
• Long-term: GDP outlook saw serious downward
revision:
GDP in US$ Trillion
Feb ’14 Feb ‘15
2020 US$ 3.26 US$ 2.59 (-20.6%)
2025 US$ 4.53 US$ 3.44 (-24.1%)
• Long-term: GDP per Capita has also been revised
downwards
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
5.500
`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25
Apr 2014 FC Apr 2015 FC
Brazil
General Market Developments
© 2015 IHS
• Lower global economic growth projections– across the forecast horizon.
• EM’s - Downgraded again. Almost all key emerging market economies have decelerated , some are
forecast to enter recession and even medium term trend growth has been shaved due to inadequate
evidence on progress of structural reforms
• Stronger recovery phase for Western mature markets. Overshoot with dip or uplifting the longer term
trend?
• How much to adjust car demand forecasts for new ‘price’ environments
• Oil Price collapse
• Currency adjustments
• China - a new normal and new reform policy approach
Key themes of this year’s forecast