This time last year, it was still possible to believe that sales in the world’s Tier 2 auto markets were on an upward trend:
- Japan, the largest of the 4 markets, had seen sales slow after Q1′s boost from buying ahead of April’s sales tax increase, but the government was confident this was only temporary
- Brazil was also slowing, with sales down 5% versus 2013, but May’s decline seemed to have slowed and confidence was high with the soccer World Cup and Olympics still ahead
- Russia had also slowed, with sales having slipped since February, but industry expectations were for a recovery to allow 3m sales to be achieved in the year
- India ‘s sales were down 3% versus 2013, but May had just seen the first monthly rise since August, and Modi’s election victory was being seen as positive
Today, however, it is clear that this optimism was misplaced in 3 of the 4 markets. But India’s recovery has indeed continued.
- One key impact has been the fall in commodity markets, caused by China’s decision to adopt its New Normal policies.
- This hit oil and metals markets, causing major problems for both Russia and Brazil’s export-oriented economies.
- The adoption of sanctions against Russia over the Ukraine invasion added to its pain
- Japan, meanwhile, has failed to see any rebound in sales, as its ageing population really doesn’t need to buy many new cars
- India, however, has seen the benefit of its ‘demographic dividend’ starting to come through. Its relatively young population could support major demand growth in the future – if Premier Modi follows through on his campaign promises to tackle its infrastructure problems and provide toilets and other key facilities
The chart shows total sales in the 4 Tier 2 countries, and their combined total for January-May 2015 (green column), versus 2014 (red) and 2013 (blue). Overall, sales have fallen 14% overall in the 4 markets versus 2013, and 16% since their peak this time last year.
Japan’s sales are down 3% versus 2013; Russia’s sales are down 41% and Brazil is down 24%. Only India is positive, up 4%. As a result, its market is now larger than either Russia’s or Brazil’s.
This highlights once again the dramatic changes underway in demand patterns as we move into the New Normal.