Outlook for GCC Automotive Demand

Transcription

1 IHS AUTOMOTIVE Presentation Outlook for GCC Automotive Demand September 2015 ihs.com Pierluigi Bellini Director MEA Light Vehicle Sales Forecasts 2015 IHS

2 IHS AUTOMOTIVE driven by POLK Middle East and Africa markets coverage by IHS Automotive IHS Automotive coverage of Middle East and Africa includes the following 13 countries representing 90% - or about 4.4 millions light vehicles of region sales in 2014: GCC Iran Israel Egypt Algeria Tunisia Morocco South Africa Additionally, starting in August 2015 a new service covers the following 9 Sub-Saharan countries: Nigeria Kenya Ivory Coast Angola Malawi Tanzania Ghana Senegal Uganda 2014 IHS 2

3 A gradual acceleration in the global economy. The global economy s growth remains subpar in 2015 Real GDP and industrial production World real GDP growth will pick up from 2.6% in 2015 to 3.0% in The plunge in materials prices is restraining growth in the commodity-exporting countries of the Americas, Africa, and Asia- Pacific. Solid gains in consumer and housing markets will support US growth, but an inventory correction will slow industrial production. Growth in the Eurozone and Japan will improve slightly, aided by monetary stimulus, currency depreciation, and pent-up demand. China s economic growth is slowed by imbalances in credit, equity, housing, and industrial markets. Prospects for emerging markets depend on structural reforms that raise productivity and allocate capital more efficiently 2015 IHS 3

4 The dollar s real exchange value is appreciating, reaching a 13-year high against major currencies Real trade-weighted dollar index Euro/US dollar Source: IHS 2015 IHS Source: IHS 2015 IHS Japanese yen/us dollar Chinese renminbi/us dollar Source: IHS 2015 IHS Source: IHS 2015 IHS Quarterly averages 2015 IHS 4

5 Dollars/barrel Oversupply has pushed oil prices lower Price of Dated Brent crude oil M1 2008M1 2009M1 2010M1 2011M1 2012M1 2013M1 2014M1 2015M1 Source: IHS Energy Latest data point August 2015 Several forces have put downward pressure on oil prices excess supply, high inventories, China s economic slowdown, and anticipation of an increase in Iranian exports. Low oil prices will not change OPEC s policy of unconstrained oil output; Saudi Arabia is unlikely to cut production. Once sanctions are lifted, Iran s return to the global market will be gradual, adding up to 600,000 b/d within 12 months. Sustained West Texas Intermediate prices of USD45/barrel or less are needed for a decline in US production to erode the global oil surplus. Oversupply will give way to rough market balance in late IHS 5

6 Annual percent change Real GDP growth in the Middle East Real GDP Bahrain Kuwait Oman Qatar Saudi UAE Arabia Iran The drop in oil prices, regional political instability, and war with the Islamic State are restraining economic growth. Lower oil prices are hurting Iran, Kuwait, Iraq, Saudi Arabia, the United Arab Emirates (UAE), and Libya, but helping Jordan, Lebanon, Morocco, and Tunisia. Whereas Saudi Arabia, Kuwait, and the UAE have strong reserves, the finances of Iran, Libya, and Algeria are strained. The nuclear agreement and likely lifting of sanctions in 2016 will boost Iran s oil exports and economic growth. Egypt s economy is recovering, but political and security risks remain. Addressing job growth, economic diversification, and competitiveness will be critical to regional stability in the long run IHS 6

7 In 2015, GCC GDP lowest in 13 years (except 2009) GDP trend GCC, real GDP trend, annual in %, `03 `04 `05 `06 `07 `08 `09 `10 `11 `12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 After falling in 2015 to below 4%, growth will gradually recover to average 4.4%, before starting to consolidate next decade. Addressing issues such as job creation and competitiveness as well as economic diversification away from oil will be critical to GCC stability and growth during the medium-to-long term 2015 IHS

8 In GCC not only economic growth, but also light vehicles sales are correlated to oil prices, if with decreasing returns 125 Brent oil price Source: IHS Energy 1,750 1,500 1,250 1, CAGR 17% GCC LVs sales CAGR 8% 0 Source: 2001 IHS 2002 Automotive IHS 8

9 Thousands GCC demand trend In 2014, demand for light vehicles in the GCC rose fast in first half, but pace somewhat slowed down in second half, with full year growth of 7%, that took the cumulative growth from 2011 to 37% driven by high oil Light vehicles sales 2,000 1,800 1,600 1,400 1,200 1, GCC Iran prices. It rose by about 1% in the first seven months of 2015 In 2015 and 2016, we expect demand will grow 1 and 1.4%. In the longer term, demand for light vehicles will resume faster growth on a positive economic outlook. Light-vehicle sales should reach 1.85 million units in This is the result of not only economic growth, but also structural factors such as demographics, current-account surpluses, and stillhigh prices for oil However more fiscal prudence by governments, limited trickle down effect, and still-high unemployment among nationals inhibit faster growth together with increasing traffic congestion in some cities Short-to-medium-term forecast carries both downside and upside risks of a sharper/longerthan-expected fall or recovery in oil prices. Based on our Brent oil-price assumption of below USD70/barrel until the third quarter of 2016, several regional economies and their respective automotive markets would be hurt 2014 IHS 9

10 Thousands Saudi Arabia and UAE are largest GCC markets with more than 70% of total sales GCC light vehicles demand by country 2,000 1,800 1,600 1,400 1,200 1, Saudi Arabia UAE Kuwait Oman Qatar Bahrain 2014 IHS 10

11 Asian brands keep dominating the GCC market Market Shares Toyota Nissan Mitsubishi Chevrolet Hyundai Honda GMC Isuzu Ford 10% 8% 7% 7% 5% 3% 3% 3% % Top 9 brands constantly represent 80% of the market Asians keep dominating GCC Toyota remains firm leader with its extensive dealer network Hyundai-Kia are on the rise Nissan lost market share (mostly in Saudi), but seems to have bottomed out Toyota Nissan Hyundai Kia Chevrolet Mitsubishi Ford GMC Isuzu 5% 5% 5% 4% 3% 2% 11% 10% 34% Ford is gradually improving replacing other American Chevrolet in 4 th spot European brands remain small players Lexus is first among premium (12 th in overall ranking) Chinese OEMs are still quite marginal, if improving penetration Toyota Hyundai Nissan Ford Kia Chevrolet Mitsubishi Honda GMC 5% 5% 4% 3% 3% 2% 8% % 37% All this confirms strong competition and need for long term commitment to local markets by new and existing players in terms of portfolio of high quality products dealer network providing not only sales representation, but also all-important after-sales service high and stable residual values 2014 IHS 11

12 Thousands GCC market segmentation development GCC light vehicles sales by segment Vehicle segmentation in the GCC is influenced by a range of factors, including geophysical characteristics, powertrain developments, household size, cultural and temperature characteristics, etc. Rapid population growth has resulted in important shifts in car-buying patterns. The main demographic economic unit is constructed around a large family explaining high shares of mid- and fullsize cars (with small and compact on the rise) A - Mini B - Small C - Compact D - Mid-Size E - Full-Size F - Luxury LCV The typical household has two cars one for family use and one for the head of the family. However, the younger members of the family recently entered the car ownership arena, resulting in an extension in household ownership from two cars to three cars Terrain affects decision on bodytype being one of the most important reasons for buying an SUV or a pickup with the latter dominating the LCV/professional segments in the market. Indeed, pickups - which are still mostly seen as workhorses - are more useful and accessible than enclosed vans, which tend to have a less powerful powertrain Cultural and utility factors continue to have an impact when making a body-style decision, which is largely skewered in favor of the sedan 2014 IHS 12

13 GCC Consumers A combination of demographics and affluence levels is driving the demand for both premium AND entry-level vehicles. 74 % Indulgence Study suggest that 74% of GCC nationals buy if they like even if not planned Luxury vehicle demand is primarily driven by GCC affluence levels, while SUV sales are witnessing solid growth due to the region s large family sizes and more rugged terrain. Affluent GCC buyers also love customizing vehicles, a trend which is expected to continue in the future. While the youth-generation and expat community appears to drive demand for smaller, fuel-efficient vehicles. Of course the population growth and growing middle class also contributes to the non-premium segments. For the mid-longer term the youth-generation has the potential to reshape the vehicle sector as these digital natives instinctively turn to mobile technologies and social media to organize their lives. 71 % 90 % Trust Biggest influencers in a Gulf consumer s life are siblings/friends, closely followed by spouse Social Media Over 90% of affluent GCC internet users have regular access to social networking sites Source: The Chalhoub Group 2014 IHS 13

14 Global geopolitical risk is higher IHS global political risk ratings, third quarter 2015 Note: IHS GRS political risk scores are calculated as the equally weighted average of the risk categories that most affect the political environment government instability, policy instability, and state failure. Source: IHS Economics GRS 2015 IHS 2015 IHS 14

15 Structural factors will continue supporting light vehicles demand GCC, population, millions of persons GCC, real per capita GDP, 2010 U.S. dollars Bahrain Kuwait Oman Qatar Saudi Arabia UAE Bahrain Kuwait Oman Qatar Saudi Arabia UAE With a total population of 49 millions people in 2013 GCC will see it rise to 60 in 2023, with a CAGR of 1.7%, lower than in recent past, but higher than world average Saudi Arabia is largest (with 29 millions people in 2013 and 36 in 2023) followed at a distance by UAE (9.3m and 10m) and further Oman (3.6m and 5m), Kuwait (3.4m and 4.5m), Qatar (2.2m and 2.6m), and Bahrain (1.3m and 1.5m) In 2013, the total size of the GCC economy was 1,347 billions of 2010 U.S. dollars or about the size of Spain. Saudi Arabia is the largest, low income economy with relatively large income disparity. UAE is the second and the most dynamic and diversified economy. They are followed by Qatar (the highest income), Kuwait, Oman, and Bahrain In all countries economic growth is much dependent on revenues from oil & gas 2014 IHS 15

16 And crude oil prices will gradually recover but new cycle will be shorter and real prices will not return to previous peak Price of Dated Brent crude oil Source: IHS Energy 2015 IHS 16

17 A new mobility debate? Congestion Local desire to address mobility issues such as congestion; however the authorities recognize that the lack of more efficient public transportation (i.e. a suitable alternative) means only limited steps can be taken. While the current public transport system in Dubai is rapidly evolving (especially with the World Expo 2020 in mind) the population still considers personal transport an absolute must. Parking/Smart payments Downtown historic Jeddah is implementing a smart-payment parking system to help reduce traffic violations and ease congestion, as well as creating more space for pedestrians and shoppers. Dubai has also revealed that they are considering introduction of smart or electronic number plates. Among the future features of the smart plate could be vehicle speed control according to the limit on a particular road. But initially the focus is likely to be on automated payment for parking and/or toll roads IHS 17

18 A new mobility debate? Road Usage/Congestion charging Successful projects in large European cities have proven that congestion charging is a possible solution to encourage more travelers to use public transport and reduce congestion. Consequently some Arab states have initiated debates on the feasibility of congestion or road usage charging. This is understood to be under consideration in: UAE, Qatar, Syria. Examples of road usage charging include the King Fahd Causeway connecting Saudi Arabia and Bahrain, and the Dubai Salik highway. However such solutions require electronic payment systems; hence the current interest in smart payment systems (initially for parking purposes). Dubai already has indicated that smart payment systems will become an element of future policy with a defined roadmap of infrastructure investment, traffic management centers and real-time traffic and travel information. Dubai appears to have taken regional leadership in the use of road usage/congestion charging. While Abu Dhabi's Department of Transport has completed a feasibility study regarding congestion charging for the city of Abu Dhabi. Hence we feel that the likelihood of further use of road pricing schemes is high in the region in future IHS 18

19 Alternative fuels/powertrains The first signs are apparent that several Middle East markets are starting to gain awareness about environmental issues, but not necessarily driven by the transportation sector. Dubai Electricity & Water Authority is going ahead with plans for a 100-megawatt solar power plant in Dubai. The project is part of the Mohammed bin Rashid Al Maktoum solar park, which the Government wants to see grow to a capacity output of 1,000 megawatts by All part of a plan for the region to become a global hub for renewable energy and clean technologies. However so far the emergence of a limited number of green vehicles in the region appear purely to demonstrate environmentally-friendly credentials. Hybrid vehicles seem to be the first step towards green vehicles. Although hybrid popularity remains low, with some pockets of interest (like in Jordan). Jordan has seen decent demand for the Toyota Prius whose popularity is due to tax incentives and rising fuel prices in the Kingdom. Although overall the green vehicle awareness in the region is limited, and even when there is awareness most people would question why they have to invest in a hybrid vehicle when it doesn't really make a big difference in terms of fuel savings IHS 19

20 Support for electric mobility? First signs of a possible EV push by 2016? Dubai s Supreme Council of Energy has indicated that they are in the final planning stages to build a network of EV charging stations at locations such as hotels and shopping malls. As part of this plan the Dubai Electricity & Water Authority intends to test 100 EV vehicles in its own fleet over the next two years. It is excepted that initially most of Dubai s EV vehicles will be fleet-owned. Several UAE federal institutions have started adopting hybrid or electric cars. Dubai police have started using a Renault Twizy EV and have hinted at expanding future EV usage. Overall EV interest has been detected in Qatar, UAE IHS 20

21 The Saudi CAFÉ The Kingdom of Saudi Arabia (KSA), through the Saudi Standards, Metrology and Quality Organization (SASO), announced new light-duty vehicle (LDV) fuel economy standards on Monday, November 17, The proposed standards apply to all new and used passenger vehicles and light trucks, whether imported from outside or manufactured in Saudi Arabia. They will be effective as of January 1, 2016, and will be fully phased in by December 31, A review of the targets will be carried by December 2018, at which time targets for will be set. The standards for new vehicles are patterned after the U.S. Corporate Average Fuel Economy (CAFE) standard structure, including test cycle and flexibility mechanisms. Flexibility mechanisms include off-cycle credits, air-conditioning efficiency credits, and phase-in flexibilities. To benefit from these credits, manufacturers must register in a SASO administered data sharing program, and submit vehicles sales plans and actual sales reports on a regular basis. Imported used vehicles are treated differently. Each used vehicle must comply with a minimum fuel economy standard, set separately for cars and light trucks. The standards are independent of vehicle attributes such as weight or size, sales-weighting and other flexibilities are not allowed, and the standards do not change over time. A Fuel Economy Committee, made up of representatives of Saudi Energy Efficiency Center (SEEC), SASO, the Ministry of Transport (MoT), the General Department of Traffic, and the Gulf Cooperation Council Standards Organization (GSO) will assess the impact of the fuel economy standard, propose any necessary modifications to the program, and resolve any disputes IHS 21

22 Summary After dropping in 2009 as a result of the global credit crisis and ensuing fall in oil prices, light vehicles demand in the GCC recovered with a notable cumulative rise of 37% in as Brent was in the USD /barrel range We expect its growth rate to slowdown in on Brent below USD70/barrel. It rose by 1.6% in the first seven months of 2015, but both downside and upside risks exist for short-to-medium-term light vehicles sales forecasts of sharper/longer-than-expected fall or recovery in oil prices in context of rising global and regional geopolitical risks Faster growth will resume in the longer term supported by structural factors such as demographics, current-account surpluses, and still-high prices for oil. On the other side, however, more fiscal prudence by governments, limited trickle down effect, and still-high unemployment among nationals inhibit faster growth together with increasing traffic congestion in some cities Sedans, SUVs, and pickups will continue to hold high market shares with some possible downsizing (starting in Saudi Arabia and extending to the other GCC countries) It remains to be seen how much and what the new, younger generations will buy. In the longer term, all classes of vehicles have nice growth potential (luxury, premium, mid, and entry-level). Alternative mobility models and fuels are still at very early stages of adoption given low fuels pump prices and the need to improve public transportation 2014 IHS 22