Barring a sudden shock such as a financial crisis like the one in 2008 or another foreseen disruption of the economy in the U.S. or other parts of the world, the auto industry appears headed for a long period of stability, according to an updated forecast by IHS Markit.
Sales appear to have reached a very sustainable plateau quite similar to the that started in the early 1990s and survived the bursting of the “Dot.com” bubble and 9/11, Peter Nagle, an IHS analyst noted in a briefing for reporters in Detroit. The long period of steady, stable sales could stretch out to 2025.
Sales in the U.S. market have been slowing since the middle of 2016, he added. “We’re entering a replacement cycle but at a very level even as the plateau tilts slightly downward. IHS expects total sales in the U.S. to reach 17 million this year and tail off to 16.8 million in 2019.
Carmakers have been helped by low interest rates, which have helped elevate the money consumers spend on new vehicles.
(Ford reveals tidal wave of new products coming by 2020. Click Here for the story.)
At the same time, the demand for new forms of mobility, such as ride sharing, will grow and sales of electric vehicles are expected to expand
A trade war that could disrupt the established trading order is certainly a possibility, given the recent pronouncement by the Trump administration. But it is difficult to predict the impact on the overall market at this point, added Nagle, noting that IHS is now in the midst of an extensive study of the potential fallout from higher tariffs but hasn’t reached any conclusions yet.
(Click Here to see more about automakers and suppliers decrying Trump tariffs.)
Trade, however, is certainly one of the variables that needs watching, he said. There is still a potential for political disruptions given the unsettled nature of Great Britain’s exit from the European Union and the uncertain outcome of the recent parliamentary elections in Italy.
But the global economy also has a lot of momentum. India’s economy is expanding rapidly and China continues to grow thought the pace will be slower as the Chinese leadership moves to reduce the excess capacity in the manufacturing and housing sectors, Nagle said.
(To see more about the potential consequences of a trade war, Click Here.)
The economies in Japan and Brazil are growing again, adding to overall momentum, Nagle said. “We expect auto sales worldwide to reach 100 million units by the end of the decade,” he added.