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Automakers calibrate strategy for muted volume growth

The fortunes of today's leading players may be less directly linked to volume growth in the years ahead, writes Megan Lampinen

Vehicle sales figures around the world face significant headwinds in the years ahead. These range from the near-term challenge of tightening emissions regulations and trade uncertainty to the longer-term threat of shared mobility and new concepts of ownership.

The European car market has just recorded the highest monthly decline of the last decade. September figures contracted by 343,000 units year-on-year, according to data from Jato Dynamics. Declines have been seen across the region, with double-digit declines in 23 of the 27 markets included in Jato’s data. Here, though, the problem has been linked to the impact from new vehicle emissions testing; many models were not homologated during the month under new WLTP testing procedures.

At the same time, there have been concerns about the impact that new forms of mobility may have on sales figures. AlixPartners, for example, estimates every car-sharing vehicle takes away 19 to 20 new vehicle purchases. Similarly, each ride-sharing vehicle is estimated to deduct one to four new vehicle sales as individuals avoid or postpone purchasing a car of their own. The 2018 Cox Automotive Evolution of Mobility Study: A Dealer’s Perspective found that dealers are expecting a 38% decline in personal vehicle ownership in the coming five years. That makes them more pessimistic than consumers, which on average expect an 18% drop in that time. “We expect that [these trends] will continue to have a growing impact on consumers’ car buying decisions, especially when driverless taxis become common,” predicted Andrew Bergbaum, Managing Director at AlixPartners.

Dealers clearly have some concerns, though the Chairman of the National Automobile Dealers Association (NADA), Wes Lutz, remains sceptical on the sales impact from shared mobility schemes. In his recent address to the Automotive Press Association, Lutz suggested these have been over-hyped by the press and that ride-hailing and ride-sharing are unlikely to replace personal vehicle ownership anytime soon. “I don’t think you’re asking enough critical questions of our more ‘disruptive’ industry partners,” he told the audience. “You’re not challenging enough assertions. You’re not asking for enough proof to back up the hype. And you’re missing a lot of the non-sexy things that will truly define what will happen with the future of personal transportation in this country.”

In terms of sales today, the latest results from the Big Three paint a worrying picture. While both Ford and GM have been actively working to transition into mobility providers, they are struggling with near-term challenges. This year’s third quarter (Q3) marked the biggest decline yet for Ford, whose sales have shrunk year-over-year for each quarter of 2018. GM took a big hit as well, with its quarterly car sales falling 24% and truck sales 7%.

“Despite a strong start to the first half of the year, the industry is finally showing signs that it’s succumbing to increasing pressure on new vehicle sales,” observed Jeremy Acevedo, Edmunds’ Manager of Industry Analysis. “Sales took their first downturn of the year this quarter, and with access to affordable lines of credit diminishing, increasing trade uncertainty and more turbulent economic conditions forthcoming, we anticipate that sales will continue to slide through the end of the year.”

DriveNow BMW i3
Opinions vary widely on the impact that car-sharing will have on new vehicle sales

That’s in the US. Globally, this year’s market is expected to remain stable, with little discernible impact from these looming threats. The IMF’s World Economic Outlook predicts moderate growth for the global light vehicle segment in 2018 to about 94 to 96 million units. As for the automakers themselves, muted growth colours their forecasts.

At BMW, the outlooks has clouded slightly over the year. The automaker kicked off 2018 with the expectation of a 1.5% rise in global light vehicle sales. By the time it released Q1 results it had tempered this to 1.3%. Q2 saw this amended again to 1.1%. Most of this modest growth is expected to come from emerging markets like Russia and Brazil, overshadowed by declines in Japan, the UK and the US. Daimler is more bullish than BMW – nearly twice as much. It has kept to its original forecast for 2% growth in the global car market this year. Renault is anticipating 3% growth, a rise from its earlier forecast for 2.5%.

In The automaker data book – Q3 2018, author Jonathan Storey takes an closer look at the corporate strategies behind the demand forecast. This latest health check on the state of the industry’s players show that they are responding in a variety of ways to today’s pivotal trends. However, their fortunes may be less directly linked to volume growth in the years ahead. “We see a divergence in the sources of automaker revenue,” McKinsey’s Simon Middleton, Associate Partner in the UK Office, told Automotive World. “We are moving from the old world, where we sell cars, to the new world, where we also sell services and merchandise.”

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