Light Vehicle Market Outlook

After 8 continuous year of growth for car sales, what does the future hold for 2018?

Jonathon Poskitt, Director, Global Sales Forecast

10 April 2018

Global Light Vehicle Market Outlook

Although global Light Vehicle sales contracted in February – a fairly rare phenomenon this decade and, in this case, related to the timing of Chinese New Year – the general picture remains rosy. A cursory glance at recent data tells a story that the automotive industry is now very used to hearing: business remains on the up.

After eight consecutive years of growth, one could be forgiven for thinking that the 2018 trajectory is a one-way bet, and it would be a brave analyst that, at this stage, forecast anything other than a further year of expansion. Even though the world’s largest market, China, will slow this year, due to the end of tax cuts and a slowing economy, improvement in Western Europe and recovery in the likes of Brazil and Russia will help to drive global sales higher.

Despite this expectation, it is prudent to consider the risks around the forecast. While those risks vary in nature, and their impact differs from country to country, more often than not, the focus of the discussion tends to be skewed to the downside, which begs the questions: is the world full of pessimists, or does the memory of the Great Recession remain too fresh in our minds?

“the generally improved outlook for a number of major advanced economies could lead to a virtuous circle for the global economy”

With the recent signing of the order implementing steel and aluminium import tariffs, President Trump reminded the world that he intends to make good on his protectionist election campaign promises. Since then, the situation has escalated, with the risk of full-blown trade war increasing markedly — Trump has just ordered his administration to plan for a further $100bn tariffs on imports from China following China’s response to more US import tariffs. If a full trade war follows, this would clearly have an adverse impact world economic growth, with consequences for global vehicle demand inevitable.

On a more optimistic note, and despite this recent trade war rhetoric, global trade indicators have, up to now, painted a positive picture, and the generally improved outlook for a number of major advanced economies could lead to a virtuous circle for the global economy, in itself acting as a further boon to global vehicle demand.

At this stage then, we view modest (2-2.5%) global Light Vehicle expansion for 2018, as a balanced forecast. However, the next foreign policy moves from the US, and China, could well lead to some re-evaluation of this outlook.