How global events impact us here at home
We all have the tendency to live life in our own little worlds. We spend most of our time in a relatively small geographical area. We work within a reasonable distance of where we live. Most of our wealth is tied up in assets that are, if not literally at home, mostly not too far afield. Because of this, we tend to project our own little worlds onto the greater one, and to assume that our lives are microcosms of the world at large. They aren’t.
In business, then, it may be easy to assume that in the rest of the world, the car industry is going through the same sort of existential examination that we’ve seen in North America in the past three years. It’s not. Consider this: 2011 may well be the first year in the history of the industry that 60 million vehicles are sold on planet earth. That’s a 50 per cent increase over the average yearly tally of the 1990s, an era we in the West now look back upon with rose-tinted nostalgia.
From 2008 to 2009, the global picture did, to a small extent, mirror the crisis that enveloped North American automotive demand and production. Total planetary sales dipped from 52 million to a little over 50 million new vehicles in 2009, about a four per cent dip. But since then, driven largely by demand from “emerging” economies, global sales have surged healthily by almost 20 per cent.
Global demand roars ahead
This fact alone should shock us out of the facile assumption that our own woes were one and the same with those of the greater world in recent years. The fundamental fact is simple: global new car demand reaches a new high, with remarkably few exceptions, every year. Most of this demand growth comes from countries most of our readers have never been to.
This is not to say that there doesn’t remain a fundamental disconnect between global demand and overall production. The recession of 2008 and 2009 helped resolve part of that lingering issue that the industry has dealt with for years, but not all of it.
Today there are about three quarters of a billion passenger cars on roads worldwide. Almost one third of those are in North America. By some estimates, there will be that many in China alone in 30 or 40 years. Of course, predictions that far down the road are notoriously difficult, but as in most industries, the majority of demand growth in the years to come will not come from developed, rich-world countries.
Old, rich and tired
Our consumers are tapped out: businesses and individuals are paying down debts accumulated in boom years and economic growth in Europe and North America will be sluggish at best for a long while yet. To use a popular if imperfect metaphor, we’re old, rich and tired. Emerging economies are young, hungry and full of energy.
So, producers will focus ever more on China, India, Brazil and other massive countries in the midst of creating the biggest middle classes the world has ever seen. To be sure, in these countries and many others, the majority of people remain very poor. Vehicle ownership is now no more realistic an objective than it was 20 years ago.
But for hundreds of millions of people around the world emerging from poverty, the kinds of consumer items we take for granted are now more and more within reach. Once certain levels of income are attained, passenger vehicles enter the mix of products in the realm of the possible. This will have profound consequences for the automobile industry.
New populations will have to be catered to, new regulations and laws followed, and producers and dealers will have to learn to make money selling low-margin inexpensive vehicles to the masses. The list of things that must be considered as businesses re-orient to take advantage of huge growth in non-traditional markets is almost too big to imagine.
For the average dealer operating in the Canadian market, this may all sound a little esoteric, and to a certain extent it is. After reading this column you’ll no doubt return to your world undisturbed by thoughts of what’s going on across town, let alone in Brazil. But it matters.
And it matters even more in a world as dependent on global connections as ours is. Your little world is not a microcosm of the greater world around you. But what happens in the latter has serious consequences for your experience in the former.
“Today there are about three quarters of a billion passenger cars on roads worldwide. Almost one third of those are in North America. By some estimates, there will be that many in China alone in 30 or 40 years.”
