Australian Car Packaging Blog Posts

The Hey Days of Detroit well and truly over

I read with interest an article in the Economist which provides an insight in to the shift in the World motor vehicle manufacturing power base. In hindsight I guess predictable to some extent:

China has overtaken America as the world’s largest car market, and it has contributed between a third and a half of the global profits of many big automobile manufacturers in recent years. Like BMW, other foreign firms are also betting heavily that the good times will continue by expanding production capacity in the joint ventures that the Chinese government requires them to form with domestic firms. Jochen Siebert of JSC Automotive, a consulting firm, estimates that the joint ventures will open $12 billion-worth of new factories in China this year and next.
And yet the hard truth is that these firms may now be headed for a car crash, shattering their dreams of never-ending profits. The first reason for this is that sales growth is slowing. The days of double-digit annual increases are over. In the first quarter of this year sales of new vehicles slowed to single-digit annual growth. Paul Gao of McKinsey, another Western consulting outfit, forecasts that growth rates will remain in the “mid-to-high single digits” for the next decade.

That is a higher rate of increase than many other countries can look forward to. However, given the new plants being opened, it looks like being insufficient to correct a worrying excess of capacity that is building up. Enough new plants to make another 5.3m light vehicles a year are due to come online in 2015 and 2016, compared with sales last year of 22.8m.

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