It’s well known that BRICS markets balance long-term potential with volatility and uncertainty, and key events in 2014 mean that by October, the BRICS economic landscape could begin to look very different.
India’s – and the world’s – largest ever parliamentary election is under way. The six week process runs until 12 May; four days later, India’s new prime minister will be announced, and a new government formed. Then it’s time to get on with building the country’s economic recovery.
At Automotive World’s Megatrends India 2014, one overriding message from automotive industry leaders struggling with a stagnant domestic market was that the election splits 2014 in two: strategic decisions and any recovery are on hold until the result is declared.
Key events in 2014 mean that by October, the BRICS economic landscape could soon look very different
Narendra Modi, Gujarat’s Chief Minister and the BJP’s prime ministerial candidate, waged an elaborate campaign against Rahul Gandhi, and appeared to go into the election as the favourite. Nonetheless, until the winner is confirmed, India in 2014 remains a game of two halves.
The same applies to Brazil, according to MAN Latin America’s Roberto Cortes: the first half of the year will see the business community prepare for the 2014 World Cup; beyond that, the focus will shift to a presidential election set to worry incumbent Dilma Roussef. The champion of Brazil’s Wirtschaftswunder, Roussef is losing her grip on the economy: rising interest rates have already hit double digits – dragging inflation up with them – while the country’s credit rating joins the country’s economic growth heading south.
Russia has other distractions at present, which, as previously suggested, endanger the investment required for a sustainable automotive industry. Suspended from the G8, and with its credit rating dwindling, the longer Putin’s Crimea campaign continues, the more unattractive Russia will become as a place for foreign companies to do business.
South Africa has just been toppled as Africa’s largest economy by Nigeria, thanks to a statistical recalculation which boosted its 2013 GDP by 89% to US$509bn. Great for Nigeria’s attractiveness for foreign direct investment (FDI), it’s timely, too: thanks to South Africa’s volatile automotive industrial relations, OEMs with existing Rainbow Nation operations are considering alternative countries in which to invest.
The IMF added further a reality check for developing economies in its latest forecast, warning that some emerging markets face “financial turmoil, capital outflows, and difficult adjustments”.
The emerging market growth is there, for sure, but identifying it is getting more complicated – and who’d have thought the shortlist might include Nigeria?
China, however, remains an (increasingly) important car market for global – especially German – OEMs; and the IMF forecasts the country’s growth at 7.5% in 2014.
Emerging markets are seen as the source of the next wave of economic – and automotive – growth. With four of the five BRICS faltering, where will that growth come from? The so-called ‘Next Eleven’? The vast majority of N-11 GDP comes from the MIST (or ‘MIKT’) nations: Mexico, Indonesia, South Korea and Turkey. MIST shows promise, but like BRICS, it’s a convenient grouping of economies sharing potential, not geography or politics. Automotive prospects for Indonesia and Mexico are good – both grew in 2013, by 10% and 8% respectively – and both are riding the wave of global OEM investments. Turkey’s light vehicle market was up 10% in 2013, but it fell almost 25% y-o-y in Q1 2014; and South Korea’s automotive market fell 2% in 2013, its second consecutive annual decline.
Daimler’s Wolfgang Bernhard told Automotive World he expects emerging markets to deliver considerable growth. The emerging market growth is there, for sure – the IMF forecasts combined ’emerging market’ growth of 4.9% in 2014; but identifying growth – particularly automotive industry growth – is getting more complicated. And who’d have expected that shortlist to already feature Nigeria?
Martin Kahl is Editor, Automotive World.
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