SEARCHING FOR GROWTH MARKETS. MUSTAFA MOHATAREM Chief Economist, General Motors

Size: px

Start display at page:

Download "SEARCHING FOR GROWTH MARKETS. MUSTAFA MOHATAREM Chief Economist, General Motors"

Jordan Patterson
6 years ago
Views:

1 SEARCHING FOR GROWTH MARKETS MUSTAFA MOHATAREM Chief Economist, General Motors

2 GLOBAL ECONOMIC AND INDUSTRY OUTLOOK Global auto sales jumped more than 45 percent over the last decade China accounted for more than 60% of the growth However, auto sales in other BRIC economies Brazil, Russia, and India also grew significantly Additional growth came from a number of middle income countries Thailand, Turkey, Indonesia, etc. Growth prospects in China still look promising While potential remains, pace of growth will moderate However, the other BRIC countries have hit the reform wall and sales are stagnant or declining Significant changes in economic policies will be required return to the Washington Consensus to restore growth In the long term, prospects in emerging markets remain promising provided they address their domestic economic policy challenges and achieve political stability

3 2014 NEW VEHICLE SALES BROADLY UNSYNCHRONIZED China still growing, but at a slower rate North America recovery continues with record sales in Canada Western Europe posting moderate sales growth GM International sales largely mixed with slowing Asian markets partially offset by strength in MENA Eastern Europe sales collapsing largely due to Russia-Ukraine conflict Millions Global Industry Sales Y o Y Comparison by Major Regions South America sales continue to decline Greater China North America Western Europe GM International Eastern Europe South America 2014 (prel.)

4 GLOBAL ECONOMIC ACTIVITY GENERALLY MIXED Economic and political conditions consistent with modest global growth outlook Economic developments in line with unsynchronized monetary policy Canada Housing risk US Slow housing recovery Fed exit strategy Mexico Economic reforms Real GDP Growth, q/q% Change Country in recovery; 2 or more qtrs q/q% > 0 Country near recovery; (q/q% < 0 followed by q/q% > 0) Country near recession; (q/q% > 0 followed by q/q% < 0) Country in recession; 2 or more qtrs q/q% < 0 SA quarterly data not available UK Steady recovery QE exit strategy EU referendum Ukraine Russia conflict Recession Egypt Economic uncertainty Venezuela Hard currency shortage Devaluation risk Hyperinflation Recession; social unrest Euro Zone Deflation risk; Possible QE EUR falls to lowest level since 2006 Russia sanctions Greek elections Jan 25 following political transition Brazil Structural inefficiencies China slowdown Policy rate up 450bps Declining commodity prices Social unrest/protests Argentina High inflation Debt default High currency risk 2015 elections India Post election reforms South Africa Work stoppages Twin deficits Thailand Military coup Russia Ukraine conflict Capital outflows Oil prices collapse RUB falls to record low Policy rate up 1150bps in 2014 Japan Recession Second consumption tax increase delayed China JPY at weakest level since 2007 Econ rebalancing Heavy indebtedness Sources: National Statistics Agencies, Haver Analytics 3

5 CHINA AND NORTH AMERICA ARE LEADING GLOBAL VEHICLE SALES Total Industry Sales (Millions) Europe Greater China Other International Operations North America South America Sales Rolling 12 Months 2001-CYTD 2014 (Nov) Source: GSRA; Calculations: General Motors Company

6 AUTO SALES IN THE U.S. HAVE TRACKED PREVIOUS RECOVERIES Recovery 1983 Recovery 1991 Recovery Current Recovery 18 Millions of Units

7 THIS TIME IS NO DIFFERENT Millions of Units The Roaring Twenties Great Depression First Oil Shock The Great Moderation 1991 S&L Crisis Second Oil Shock 2009 Great Recession

8 Industry (Millions) VEHICLE SALES TOOK OFF AFTER CHINA JOINED WTO IN 2003, TOTAL VEHICLE SALES EXCEEDED 23 MILLION UNITS IN Industry GM GM (Millions) Sources: GM Global Sales Reporting System

9 VEHICLE PRICES IN CHINA BEGAN TO DECLINE AFTER WTO ACCESSION 110 Mini Small Medium High Luxury PV Sources: Cheshi.com.cn

10 FROM A LONGER TERM PERSPECTIVE, THE GLOBAL ECONOMY IS EXPERIENCING A MULTI-SPEED RECOVERY WITH EMERGING MARKETS GENERALLY OUTPERFORMING DEVELOPED MARKETS Peak Real GDP = 100 at Time = Key: North America G7 Economies BRIC Misc. Other Real GDP Relative to Pre-Crisis Peak China (No Peak) India (Peak = 2008 Q3) Indonesia (No Peak) Turkey (Peak = 2008 Q1) S Korea (Peak = 2008 Q3) Mexico (Peak = 2008 Q2) Brazil (Peak = 2008 Q3) S Africa (Peak 2008 Q3) Canada (Peak = 2008 Q3) USA (Peak = 2007 Q4) Russia (Peak = 2008 Q2) UK (Peak = 2008 Q1) Sources: National Statistics Agencies, Haver Analytics; Calculations: General Motors Company

11 IN LINE WITH THE POST-CRISIS REAL GDP DEVELOPMENT, NEW VEHICLE SALES SINCE 2007 HAVE BEEN LARGELY UNEVEN Sales = 100 at Key: North America G7 Economies BRIC Misc. Other New Vehicle Sales Relative to Indonesia China India Brazil S. Korea Turkey Canada Japan USA UK Mexico Germany S. Africa Russia France Italy Sources: Polk, General Motors Company; Calculations: General Motors Company

12 GLOBAL NEW VEHICLE SALES ARE ESTIMATED TO TOTAL 86.9M IN 2014, UP 20.2M SINCE THE 2009 RECESSION Millions M 34.8M 41.8M Second Oil Shock First Oil Shock Euro Introduced 50.5M 64.7M Asian Financial Crisis Gulf War Dissolution of Soviet Union Great Recession 81.2M Source: Polk, General Motors Company; Calculations: General Motors Company

13 CONTRIBUTORS TO GLOBAL SALES GROWTH Growth in sales from the 1990 s to the 2000 s largely reflected synchronized gains among developed and developing markets Growth in new vehicle sales in the current decade largely reflects gains from developing markets New Vehicles Sales (000 s) 1990 s 2000 s 2010 s 1 USA 14,764 USA 16,189 China 18,731 2 Japan 6,766 China 6,602 USA 13,757 3 Germany 3,820 Japan 5,599 Japan 4,975 4 France 2,374 Germany 3,625 Brazil 3,706 5 Italy 2,263 United Kingdom 2,713 Germany 3,340 6 United Kingdom 2,196 France 2,577 India 3,201 7 South Korea 1,311 Italy 2,570 Russia 2,693 8 Canada 1,299 Brazil 1,977 France 2,446 9 Brazil 1,292 Russia 1,796 United Kingdom 2, China 1,248 Spain 1,700 Italy 1, Spain 1,243 Canada 1,639 Canada 1, Russia 768 India 1,453 Iran 1, Australia 642 South Korea 1,330 South Korea 1, Netherlands 570 Mexico 1,031 Australia 1, India 553 Australia 920 Thailand 1,056 Green Text: Increase versus previous decade Top 15 Total 41,109 Top 15 Total 51,721 Top 15 Total 63,914 average Top 15 as % of Top 15 as % of Top 15 as % of Red Text: Decrease versus previous decade 81% 80% 80% Total Total Total Source: average Polk (data through 2013CY); Calculations: General Motors Company

14 NEW VEHICLE SALES DEVELOPMENT AMONG THE TOP 10 MARKETS During the recession, vehicle sales in Russia were in sharp contrast to other BRIC markets Scrappage programs in Germany and France helped to limit the impact of the recession As of 2014, China and developed markets are supporting growth in new vehicle sales Flat sales in India, and declining sales in Brazil and Russia reflect a combination of cyclical, structural, and political concerns (Prelim.) USA 16,900 USA 16,406 China 14,191 China 21,451 23,900 Japan 5,849 China 9,245 USA 10,536 USA 15,652 16,858 China 4,934 Japan 5,350 Japan 4,604 Japan 5,376 5,518 Germany 3,502 Germany 3,482 Germany 4,049 Brazil 3,760 3,464 United United 2,943 Kingdom Kingdom 2,796 Brazil 3,208 Germany 3,258 3,357 Italy 2,496 Russia 2,794 France 2,685 India 3,140 3,150 France 2,441 Italy 2,776 Italy 2,358 Russia 2,898 2,539 Spain 1,715 France 2,585 India 2,267 Canada 1,637 Brazil 2,495 United Kingdom United Kingdom 2,596 2,844 2,220 France 2,173 2,211 Brazil 1,377 India 1,977 Russia 1,527 Canada 1,797 1,890 Sources: Polk, General Motors Company; Calculations: General Motors Company

15 MARKETS ARE FACING CHALLENGES WITH VEHICLE SALES STALLING OR DECLINING Total Industry Sales (Millions) Brazil, China, India and Russia: Sales Rolling 12 Months 2001-CYTD 2014 (Nov) Brazil India Russia China (right axis) China Total Industry Sales (Millions) Sources: GM Global Sales Reporting System

16 GROWTH AMONG THE BRIC MARKETS HAS BECOME LESS SYNCHRONIZED SINCE THE RECESSION Pre-Recession Growth Drivers Synchronized global growth High risk appetite High commodity prices High pent-up demand Strong growth of middle class Post-Recession Limits to Growth Uneven global recovery Increased risk aversion; capital outflows High dependency on commodity sectors or key export markets Partially exhausted pent-up demand Slower expansion of middle class Recession exposed structural concerns Sources: National Statistics Agencies, Haver Analytics: Calculations: General Motors Company Index Normalized Real GDP with Pre-Crisis Peak = 100 at Quarter = 0 Russia (Peak = 2008:Q2) Brazil (Peak = 2008:Q3) India (Peak = 2008:Q3) China (No Peak; 100 = 2008:Q2) Quarters Before and After Peak

17 THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE, IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY Other factors include the road infrastructure, congestion, urbanization, and population density Vehicle Parc Per 1,000 People Malaysia Poland Greece Baltics Portugal Czech/Slovakia Russia Hungary Argentina Romania Mexico Thailand Uruguay Brazil Chile Turkey Ukraine South Africa China Middle East Operations Indonesia India South Korea Taiwan Spain Italy Israel Finland Canada France Germany Hong Kong Austria Netherlands Belgium/ Lux. Singapore 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Japan United Kingdom Real GDP Per Capita (2005 USD) Sweden Ireland Denmark Switzerland Norway Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company

18 THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE, IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY Other factors include the road infrastructure, congestion, urbanization, and population density Vehicle Parc Per 1,000 People Malaysia Poland Greece Baltics Portugal Czech/Slovakia Russia Hungary Argentina Romania Mexico Thailand Uruguay Brazil Chile Turkey Ukraine South Africa China Middle East Operations Indonesia India Taiwan Spain Italy South Korea Israel Finland Canada France Germany Hong Kong Austria Netherlands Belgium/ Lux. Singapore 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Japan United Kingdom Real GDP Per Capita (2005 USD) Sweden Ireland Denmark Switzerland Norway Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company

19 THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE, IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY Other factors include the road infrastructure, congestion, urbanization, and population density Vehicle Parc Per 1,000 People Malaysia Russia Hungary Argentina Romania Mexico Thailand Uruguay Brazil Chile Turkey Ukraine South Africa China Middle East Operations Indonesia India Poland Greece Baltics Portugal Czech/Slovakia South Korea Taiwan Spain Italy Israel Finland Canada France Germany Singapore Hong Kong Austria Netherlands Belgium/ Lux. 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Japan United Kingdom Real GDP Per Capita (2005 USD) Sweden Ireland Denmark Switzerland Norway In terms of vehicle density, developed markets are trending at levels that reflect market saturation Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company

20 THE PACE OF ECONOMIC GROWTH AND DEVELOPMENT WILL DETERMINE, IN PART, THE LEVEL OF VEHICLE OWNERSHIP IN EACH ECONOMY Other factors include the road infrastructure, congestion, urbanization, and population density Vehicle Parc Per 1,000 People Malaysia Poland Greece Baltics Portugal Czech/Slovakia Russia Hungary Argentina Romania Mexico Thailand Uruguay Brazil Chile Turkey Ukraine South Africa China Middle East Operations Indonesia India Spain Italy South Korea Taiwan Israel Finland Canada France Germany Austria Netherlands Belgium/ Lux. Singapore Hong Kong 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Japan Developing Markets Have Upside Potential United Kingdom Real GDP Per Capita (2005 USD) Sweden Ireland Denmark Switzerland Norway In terms of vehicle density, developed markets are trending at levels that reflect market saturation Sources: National Statistics Agencies, United Nations, Haver Analytics, Polk; Calculations: General Motors Company

21 ALTHOUGH NOT WITHOUT ROAD BUMPS AND RISKS, INDUSTRY POTENTIAL REMAINS HUGE IN CHINA AT THIS STAGE Country 2013 Vehicle Parc/ 1,000 People U.S. 796 Australia 702 Japan 590 Korea 393 Russia 322 Taiwan 312 Thailand 208 Brazil 198 China 91 Egypt 56 India 26 Source: Ward s Auto, United Nations, GM calculation

22 WHERE WILL OIL PRICES GO IN 2015? West Texas Intermediate (USD Per Barrel) OPEC and the U.S. cut production in early 2015 Global economy expands faster than expected in early 2015 (China, Europe, etc.) Current Price 2015 Range OPEC and the U.S. cut production in H Global economy continues at uneven pace (China slowdown ends, Europe continues to struggle) OPEC and the U.S. do not cut production until late in 2015, if at all. Global economy continues at uneven pace (China slowdown continues, Europe continues to struggle) 22

23 NATURAL GAS To compare oil (priced in dollars per barrel) and natural gas (priced in dollars per million BTUs) on an energy equivalent basis, natural gas prices have to be increased by a factor of 5.8, because one barrel of oil produces 5.8 million BTUs of energy. Relative to the price of oil, natural gas prices have been falling steadily since early 2006, and are now almost 80% cheaper than oil on an energy-equivalent WTI Crude basis. Oil Vs. (American Natural Enterprise Gas Equivalent Institute) (In Barrels) WTI Nat Gas =

24 SUMMARY Auto industry will remain a growth industry for the foreseeable future China alone will provide more growth in auto sales and revenue than possible in other industries The other BRIC countries also have tremendous potential, but will need to make significant policy changes A number of middle income countries Indonesia, Turkey, Thailand, Malaysia, etc. offer good prospects I am especially intrigued by the potential in Mexico as it implements energy policy reforms Africa could be the next frontier market high risks, but high rewards Don t forget the large developed markets in North America, Western Europe, and Japan as they will provide significant revenue growth, and will remain the prime markets for advanced technology vehicles

Primary energy. 8 Consumption 9 Consumption by fuel. 67 th edition

Primary energy. 8 Consumption 9 Consumption by fuel. 67 th edition Primary energy 8 Consumption 9 Consumption by fuel 67 th edition Primary energy Consumption* Growth rate per annum Million tonnes oil equivalent 27 28 29 2 211 212 213 214 215 216 217 217 26-16 Share 217