Global automotive growth will likely be constrained in the short-term but will likely accelerate once the world economy recovers from its current problems, according to a pair of new reports, with the number of passenger vehicles on the world’s roads expected to more than double by 2035.
China is expected to lead the rapid expansion, along with other emerging markets – with the total number of passenger vehicle forecast to climb to 1.7 billion over the next 23 years, reports the International Energy Agency.
The IEA study warns that this growth could create problems by straining global sources of oil since alternate propulsion systems will remain on the margins while conventional internal combustion power “will continue to dominate the passenger light-duty market through to 2035.”
The automotive market has seen significant growth in recent years and now stands at around 800 million, according to various reports. According to some forecasts, as many as 80 million new vehicles will be produced annually by the middle to late part of this decade. While much of that production will simply replace existing vehicles in established markets like the U.S. and Europe, it will rapidly expand the fleets in emerging markets such as China and India, according to the IEA.
The agency’s new study anticipates that by 2035 there will be 400 million passenger vehicles on the road in China – surpassing both the U.S. and Europe, today’s leaders – though the booming Asian nation will continue to lag on a per capita basis. Nonetheless, where China had just four cars per 1,000 residents in 2000 and now has 40, the figure is forecast to 310 per 1,000 by 2035. In the U.S., there are 660 vehicles per 1,000 people.
India, which is likely to soon match the population of China, has also seen a rapid expansion of its vehicle fleet. It had just 14 million passenger cars in use as of last year, but the IEA forecasts that will reach 160 million by 2035.
Both India and China have continued their rapid pace of automotive growth despite the economic woes that have plagued more established auto markets in recent years. But continuing financial problems, especially in Europe, have restrained the overall pace of global automotive growth and will likely do so for at least the near-term future, according to a separate report from Moody’s Investors Service.
“Although we forecast global light vehicle sales growth of 4.4% in 2012, we have revised our forecast for 2013 demand growth to 2.9% from our January forecast of 4.5%,” said Falk Frey, a Senior Vice President in Moody’s Corporate Finance Group and author of the report. “Our growth revision is driven by weaker-than-expected demand in Europe and slowing economic pace in China.”
In fact, where Moody’s had originally anticipated 3% growth in European sales for 2013, it now anticipates a 3% contraction. Its forecast for China still anticipates significant growth in sales – to 8.5%, but that is down from an earlier 2013 forecast of 10% and well behind the pace seen during the boom years of the past decade.
Economic woes are compounded by “major headwinds (from) sustained high oil prices,” warns consulting firm ICIS, which further constrain automotive purchases, in particular.
Nonetheless, most analysts anticipate the current setbacks are, at worst, temporary, and that by mid-decade sales will recover and nudge global car sales close to the 80 million annual mark. Some have projected demand could surge to 100 million by decade’s end.
And that will likely create a series of problems for both established and emerging markets. Congestion is considered to be one of the most serious. To deal with the problem, the number of paved lanes of roadway has increased by 30% over the last decade, according to the IEA study, with 28 million miles of paved lanes now in use. It forecasts another $20 trillion will be spent to add 10 million more miles by 2035.
In Washington, D.C., four new toll lanes will be opened this week to help relieve pressure on the Beltway surrounding the nation’s capital. But 80% of new roads likely to be added over the next 23 years will go into developing markets, according to the study.
Perhaps an even bigger concern is the availability of oil and the search for low-emissions powertrain alternatives. While debate continues over when the world might reach the peak oil paradigm – where new sources of petroleum can no longer supplement the loss of older wells – there is little doubt that demand will further strain resources.
Meanwhile, there is growing consensus that the consumption of fossil fuels is worsening global warming.
“Fuel economy standards need to be set at levels that are ambitious enough to accelerate the rate of improvement in the fuel economy of vehicles and this requires the standards setting process to take long-term technology learning curves into account,” warned the IEA report – which noted that only China, among emerging markets, has so far set fuel economy standards.
China has also been particularly aggressive in pushing for the use of alternative propulsion, primarily battery power. The IEA does not foresee a big transition to electric propulsion, however. While conventional hybrids are forecast to account for 20% of vehicle sales by 2035, plug-ins and pure battery-electric models are anticipated to remain marginal, at just 4%.