World auto market hits new heights; 100 million sales by 2020?

August 3, 2016

Most automakers have seen moderate U.S. sales growth in 2016. The stats are even better in other countries, and there's no slowdown in sight.

That raises a number of questions, including: how long until the global auto industry reaches the magic number of 100 million sales per year?

The answer could be, "sooner than you think".  

Where things stand

In the first half of 2016, car companies saw a record-breaking 45.57 million sales worldwide, an increase of 3.9 percent. North American growth lagged just slightly behind that, at 3.8 percent, while India was perfectly on-par. Europe climbed 6.0 percent (despite weakness in the U.K. and Russia), the Asia-Pacific region jumped 9.2 percent (though Japanese sales took a nearly five-point tumble), and China's sales shot up 14.9 percent.

In fact, the only region that recorded a drop in sales was South America, where June's stats alone rang in 15.3 percent below last year. Analysts attribute the slump to low oil prices (which has adversely affected many South American economies), and turmoil caused by political uncertainty and the Zika virus.

Add all that up, carry the one, and it's pretty clear that car sales are on the way up. Consider U.S. numbers for July: over 26 selling days, 1,522,297 vehicles were sold, a 0.7 percent rise from July 2015. Year-to-date sales clocked in at 10,167,217, up 1.3 percent compared to the first seven months of 2015. Seasonally adjusted annual sales projections are likely to come in around 17.6 million, up from 17.55 million seen in July 2015.

Where things are going

On the off-chance that worldwide sales were to remain flat for the rest of 2016, automakers would end the year with 91.14 million sales worldwide. If sales continue to rise by 3.9 percent, the final tally will come in at nearly 93 million vehicles sold. And if that 3.9 percent growth continues for two more years, annual global sales could top 100 million by December 31, 2018.

Two countries will account for half of that total by themselves. China is on pace to end the year at or above 25 million, and if it sustains its current appetite for cars, the country could see 33 million sales per year by 2018. At the very least, analysts expect sales in China to hit 30 million by 2020. When that happens--and if U.S. sales continue modest growth or even remain flat--China and America alone would see roughly 50 million sales per year.

That said, there are some obstacles that the auto industry will have to negotiate on its path to 100 million annual sales--things that could reduce demand for new vehicles and slow growth:

Plateauing sales: In much of the developed world, demand for new vehicles stabilized decades ago, growing and shrinking in sync with the population, or with business expansion and such. In emerging markets like China and India, though, privately owned cars remain a fairly new phenomenon and are now very, very desirable. At some point, that desire will level off, but industry-watchers don't expect it to happen for at least another decade. 

Urbanization: Even in heavily agricultural areas, many people are leaving farms and rural sites behind. In 2007, 50 percent of the world's population lived in urban areas, and that number has continued to climb. As cities become increasingly crowded, car ownership becomes less attractive due to the problem of parking, the cost of insurance, and the availability of other transportation options like buses, subways, and ride-sharing services like Uber.

Cost of vehicles: Today, the average new car runs nearly $34,000, and with all the high-tech safety and infotainment gizmos that automakers are adding, prices aren't likely to fall anytime soon. As we recently reported, most American families can't comfortably afford a new car: how long until that disparity causes sales to backslide?

If none of those factors manage to impede sales of new vehicles, we could see two billion vehicles on Planet Earth's roads by 2035, if not sooner. Stay tuned.

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