After the Arab Spring: Part 1 – the outlook for car markets in North Africa

The Middle East and North Africa (MENA) region has three distinct geographic and economic zones: North Africa, The Levant and the Persian Gulf. North Africa stretches over 2500 miles between Morocco and Egypt, has a population of over 150 MN and, excluding oil-rich Libya, has an income per head between $5,000 to $10,000.  Across the region between 15% and 25% of the population survive on $2 per day. The Levant fringes the eastern Mediterranean over a distance of 1,100 miles, with a population of 162 MN, including Turkey.  Income per head is higher at $6,000 to $14,000 and wealth is spread more evenly. Less than 5% of the population earn under $2 per day. The ‘jewel in the crown’ is the Gulf where a small population of nationals own two-thirds of the world’s hydro-carbon wealth. The population is around 70 MN, including ex-pats,  and income per head  – excluding Yemen  – ranges from $43,000 to $130,000. The 2016 average was $33,005. What is the outlook for vehicle markets in the MENA region? Faced with contrasting economic fundamentals – broadly, those who have oil and those who have not  –  the impact of the global financial crisis  has varied between countries and MENA zones. It  revealed structural weaknesses in both US dollar and Euro sovereign debt which increased the flight of investment funds into commodities, leading to higher prices  – in gold, grain, oil and many others.  In turn inflation, unleashed across the world, hit the poor hardest and North Africa has plenty of them. The relentlessly volatile oil price shows how bumpy the economic ride may yet be. It’s estimated that, just to meet the financial costs of social reform, Saudi Arabia –  and many other OPEC members  – need an OPEC price of $90 a barrel to avoid a […]

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2011 UK New Passenger Car Market Forecast

Since 1980 UK Recessions have lasted an average of 4 years.  If that pattern holds 2011 should see the UK economy rebound to its trend GDP growth of 2.5% – 3.0%. Will that actually happen? Probably not. This recession has been the deepest, excepting the 1930’s, with a cumulative GDP contraction of 6.3% . But, we’re now on the upturn – see the chart above. The question is, how long will it yet take? On current trends GDP will not regain its 2008 level until 2012.  Today GDP is back to where it was in 2006.  But, while construction, services and the public sector are at 2006 levels, industry and agriculture remain depressed. GDP did grow in 2010  – and the new car market benefitted  because consumers reduced their savings tempted by price discounting. It’s unlikely to recur in 2011. Most likely consumer spending will fall coinciding with a drop in government spending. Inflation is set to rise. Growth –   if it comes  – will be driven by building up stocks  of goods for export. With mainstream retail customers hoarding their money the fleet buyer will have to take up the slack. Will that happen?

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Economic Austerity and the outlook for UK Motor Retailers.

It was at the start of 2009 that luxury brands – LVMH, Burberry, Bulgari, Chanel, Balenciaga – first reported ‘luxury fatigue’, where buyers report that conspicuous consumption becomes an embarrassment. It is more than the fact that demand for allotments is at a record high or that spending in the haberdashery department at John Lewis is up 20%, after decades of decline, as we all make do and mend. Canny retailers all report the emergence of a new customer attitude – saving, not spending, as fear of unemployment and high credit costs become the norm. As a result, the July 2010 Nationwide Consumer Confidence Index fell to its lowest level since May 2008. While the ‘wannabe rich’ are cutting back, the mainstream customer, whose disposal income is falling 2% a year, has almost halted discretionary buying. What might that do for car retailing?

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UK Car Market Round Up – 12 months to June 2010

Half-way through 2010 and there are signs that the UK Retail Motor Market is entering the recovery phase. Those in the ‘budget’ segment saw strong sales in 2009, but the last quarter of 2009 and Q1 2010 are showing gains for both mainstream and premium market retailers. There are downside risks – tax rises, VAT increase, end of Scrappage Scheme, reduced government investment, to name just a few. However, given the average historical length of UK recessions – 4 years – and the new management, reduced working capital and indebtedness of many retail groups, the future appears brighter than at any time since 2007. The only serious concern hangs over Pendragon who still find profits elusive. The recent resignation of long-time chairman, Sir Nigel Rudd, may signal the removal of other senior staff as has been long expected.

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UK Car Market to December 2009

The UK New Car Market fell 6% in 2009. No surprise there: GDP was down over 4% and consumers continued to shy away from spending towards saving. But for the 1.9MN who did venture into the market, what made the biggest difference? Why did the winneres win and the losers lose? Other than new models, the most importatnt differentiator was exchange rates versus Sterling. If a manufacturer could avoid producing or buying parts from high value currency areas like the Yen, US dollar or Euro, they almost certainly attracted buyers and vice versa. So Nissan who make cars in the UK (weak £) and could use Renault to substitute EU parts for even more expensive japanese ones did well. The runaway winners were Hyundai and Kia who had every advantage imaginable: scale economies, the UK Scrappage Scheme and a weak Korean Won. If this scenario keeps up, they’ll probably enjoy a bumper 2010 as well!

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US Car Market Round-Up – to end September 2009

Even when it’s in distress the US Car & LCV Market posts large numbers, compared to European markets at least. At the present rate it’s on course to sell 9.2 MN units in 2009. Sounds a lot, except that in 2008 – a bad year – it sold 13.2MN and in 2007 it sold 16.1MN. Compared to those ‘good old days’ of ’07, the market is down 43%. That helps to explain why the Obama Government was so keen to help out with the ‘Cash for Clunkers’ programme (Official name – Car Allowance Rebate System or ‘CARS’).  It was launched on the 24th July 2009 with a $1BN budget and was expected to last until 1st November. In fact, it ran out of money after just one week and the US Government had to add another $2BN. But, even with that funding, the pent-up demand for cars was so great that the programme  ran through the extra cash and had to be closed on the 25th August 2009, having supported 700,000 new car deals. The entire programme lasted 4 weeks! A roaring success? Wait and see.

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US Car Market Round-Up – to June 2009

The improving trend continues in US Car and LCV market. Toyota are the big winner, while Subaru, Hyundai and Kia also do well. Chrysler and GM dissapoint as expected – here’s hoping the damage isn’t permanent for either of them, but they both have a mountain to climb. It appears as if the well-trumpeted forecast that Ford would profit from their difficulties was on the money.

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