Global Auto Outlook: Regional Volatility Is “Here to Stay”

The global auto industry will expand about 2.6% in 2016, as demand in such mature markets as Europe and the U.S. offset weak sales growth in emerging markets, according to presenters at LMC Automotive’s annual outlook conference in suburban Detroit.

But regional results will continue to vary dramatically. Says Jeff Schuster, LMC's senior vice president of forecasting, “Volatility is here to stay.”

The firm anticipates capital investment, which has been flowing into emerging markets, will continue to reverse and target developed economies instead. One reason: The 8% growth rate for sales in increasingly unpredictable emerging markets has declined to about 3% and isn’t likely to improve anytime soon.

LMC says worldwide production of cars and light trucks this year will grow only 1% to 87.9 million vehicles. Output in western Europe and North America will account for nearly 1.4 million additional vehicles. But those gains will be largely offset by year-on-year declines in South America (-700,000 units), Japan (-600,000) and Russia (-400,000).

LMC predicts worldwide output will grow 4% to 91.5 million vehicles in 2016 and 4% to 95.0 million in 2017. Volume will surpass 100 million in 2019 and reach about 105 million in 2020.

In North America, LMC expects vehicle production to grow 19% to 21.6 million vehicles by 2022, with 75% of the total occurring in Mexico. The firm says Canada’s contribution will shrink 11% over the period. Mexico, which currently builds about 30% of small and compact vehicles in the region, will account for half the volume in those categories by 2022, according to the forecasters.