OREANDA-NEWS. November 08, 2010. Continued strong demand growth in emerging markets and widespread inventory replenishment is set to mark 2010 as a record year for global light vehicle assembly, eclipsing the 2007 pre-crisis high point, according to PwC’s latest Autofacts forecast. Such a turn of events is possible thanks to the steadily growing demand in emerging markets and a notable resurgence in inventories, reported the press-centre of PwC.

Natalia Scherbakova, partner, automotive Industry, PwC in Russia comments:

“In light of a muted sales recovery in the US and the effects of government incentive withdrawals being felt across Europe and Japan, it should not be surprising that sales in the established markets through 2010 are in decline or stable at best. Indeed, given such uncertain circumstances for the world’s major automotive markets, a record level of vehicle assembly in 2010 would have been dismissed a year ago.

“The onus for the industry's development in 2011 is certain to lie with the developing markets particularly BRIC countries. Thus far this year, inventory rebalancing has been one of the main drivers behind global light vehicle assembly volumes.”

According to the latest Autofacts forecast, Japan, Western Europe and the US boosted light vehicle sales by 5.6% in the first eight months of 2010, equivalent to almost a 1.1 million unit sales improvement. However, it was the BRIC countries that led growth, boosting sales by a third (33%), equivalent to a 3.5 million unit increase.

Thailand, Indonesia and Malaysia also contributed to emerging market growth, delivering a combined ~500k sales uptick in 2010, providing further evidence of a power shift towards Asia. Furthermore, in contrast to the level of output recorded at the industry’s last peak in 2007, when BRIC countries accounted for 18.7% of global output, these key growth markets will likely account for over 30% of 2010’s global assembly forecast of 69.9 million units.

At the start of 2010, hopes were high that US economic recovery would deliver a light vehicle market in excess of 12 million units. As it stands now, fitful economic progress coupled with the market’s restrictive credit environment (see Analyst Note dated 13 September 2010) has delivered seven consecutive months of stable, albeit depressed, Seasonally Adjusted Annual Rate (SAAR) figures between 11.1 and 11.8 million units.

Europe’s situation is similar as scrappage schemes have ended in all major markets. Despite a more resilient H1 2010 than many had anticipated, sales are falling rapidly. Calculations for the West European SAAR showed the lowest rate in July and August since January 2009, when programmes were initially implemented. Also, austerity measures in many countries will likely temper 2011 vehicle sales.

In Russia, the government's scrappage scheme, already extended from 200,000 units to 400,000 units, will likely be extended further (details yet to be determined). This decision should drive continued sales support for vehicles made in Russia, both global and domestic brands. The latter, in particular, have benefitted from the scheme, and combined with new model launches in 2011, should support rising sales volumes. Likewise, global automakers continue to expand output in Russia, with several plants reaching full capacity. As a result, 2011 assembly is forecast to recover to pre-crisis levels of 1.7 million units.