Gentle Recovery Amidst Several Challenges in the Global Auto Market
Jul 19, 2024
After experiencing the economic downturn caused by the pandemic, as well as the high inflation triggered by the Russia-Ukraine crisis, the global economy is gradually emerging from the gloom and is in a process of gentle recovery. Against this backdrop, the global car market continues to warm up. Except for the Japanese car market, which has seen a decline in sales due to a scandal involving data fraud, other major markets have achieved growth in car sales in the first half of this year, with most increases in the single digits. It is worth mentioning that Russia, which was severely hit by the Russia-Ukraine crisis, has achieved a high-speed growth of 75% in car sales in the first half of the year, partly because the base number of the same period last year was relatively low. Although the global car market has delivered a good report card in the first half of the year, it is also facing severe challenges, such as the rise of international trade protectionism, the intensification of geopolitical conflicts, and the uncertainty brought by the election season in Europe and America, which have adverse effects on the growth of the global economy and the car market in the second half of the year. Especially in the European and American markets, due to high prices and the constraints of supporting infrastructure, the sales of pure electric cars have obviously cooled down, casting a shadow over the recovery of the car market.
According to data provided by Cox Automotive Consulting, the new car sales volume in the United States in the first half of this year was about 7.93 million, a year-on-year increase of 2.9%. Among them, the car market in the United States only increased by 1% year-on-year in the second quarter, highlighting the trend of weak market demand and slowing recovery. The company pointed out that although car companies and dealers have launched many preferential measures for buying cars at present, the inventory level of new cars in the United States is still rising. The economic outlook, expectations for interest rate cuts, and the uncertainty of the U.S. presidential election have led many American consumers to postpone buying cars.
Jonathan Smoke, Chief Economist at Cox Automotive Consulting, said that the growth of the U.S. car market in the first half of this year was mainly due to the increase in wholesale sales, not retail sales. He expects further slowdown in the growth of U.S. car sales in the second half of the year. "There are many uncertainties in the future, and we believe it will be difficult to maintain the current growth momentum in the second half of the year." In addition, the North American car dealer software supplier CDK was attacked by the network at the end of June, which also had a certain impact on car sales in the United States, and some dealers were forced to delay delivery to the third quarter, bringing additional pressure to the market.
Car industry analysts in the United States pointed out that the inventory level of dealers is on the rise, especially for pickup trucks and other high-priced models, while low-priced small cars and hybrid models are in short supply. As a result, the performance of major car companies in the U.S. market in the first half of the year was differentiated. Among them, Japanese car companies such as Toyota and Honda achieved high growth by relying on hybrid models, while the performance of companies such as General Motors, Stellantis, and Hyundai was relatively weak. In the first half of this year, although General Motors was still the car company with the highest sales volume in the U.S. market, its sales volume decreased by 0.4% year-on-year, to 1.29 million units; Toyota's sales volume in the United States increased by 14.3% year-on-year, reaching 1.187 million units. If Toyota maintains this growth rate in the second half of the year, it is very likely to surpass General Motors and become the "best-selling car company in the United States". In addition, Honda's performance in the U.S. market is also good, with sales exceeding the significantly declining Stellantis in the first half of the year.
It is worth noting that the U.S. pure electric car market continues to cool down, with only a year-on-year increase of 7% in the first half of the year, reaching about 600,000 units, accounting for 7.6% of the U.S. new car market share. The high price of electric cars has made many potential customers "retreat," and although the discount strength of dealers is not small, consumers still expect greater price reductions in the future. In addition, data from Cox Automotive Consulting shows that in the second quarter of this year, Tesla's share of the U.S. pure electric car market fell below 50% for the first time, from 59.3% in the same period last year to 49.7%. On the one hand, it is due to the current weak demand for pure electric cars in the United States, and on the other hand, it is because car companies such as General Motors, Ford, Hyundai, and Kia have launched new electric car models, putting Tesla under "great pressure".
From January to June this year, the car sales of the five major car markets in Europe - Germany, the United Kingdom, France, Italy, and Spain - all achieved growth, with most increases around 5%. In addition, like the United States, the demand for electric cars in Europe is also relatively weak. According to data released by the European Automobile Industry Association, in May 2024, the new car registration volume of passenger cars in the European Union decreased by 3.0% year-on-year, among which the registration volume of pure electric cars decreased by 12.0%, the registration volume of plug-in hybrid cars decreased by 14.7%, and the registration volume of hybrid cars increased by 16.2%.
The slowdown in market demand, the expiration of subsidy policies, range anxiety, uncertain economic prospects, and the lack of affordable models have limited the further popularization of electric cars, especially pure electric cars, in Europe. Taking Germany, the largest car market in Europe, as an example, the passenger car sales volume in the first half of the year increased by 5.4% year-on-year, reaching 1.47 million units. At the same time, the sales volume of electric cars in Germany decreased by 16.4% year-on-year, to 167,000 units. The main reason is that the German government canceled the electric car purchase subsidy at the end of last year, and the enthusiasm of consumers for buying cars has dropped significantly. Among many car companies, Tesla's sales volume in the first half of the year plummeted by 41.6%, due to weak demand and intensified competition.
The Society of Motor Manufacturers and Traders (SMMT) in the United Kingdom stated that in the first half of this year, the new car sales volume in the UK increased by 6% year-on-year, reaching 1.007 million units, which is the first time that the new car sales volume in the UK in the first half of the year has exceeded one million units since 2019. However, the UK car market achieved higher growth in the first quarter, and the second quarter has obviously slowed down. Like the UK, the French car market is also struggling to recover, with a decline of 2.9% in May, and the decline in new car sales volume in June expanded to 4.8%, reducing the overall growth rate of the country's new car sales volume in the first half of the year (a year-on-year increase of 2.8%).
Due to the weak demand for electric cars, at the beginning of this year, many multinational car companies announced a slowdown in investment in the field of electrification and stopped talking about the "ban on combustion". On the contrary, many car companies said they would continue to develop the next generation of internal combustion engine models and plan to launch new plug-in hybrid or hybrid models. Recently, Mercedes-Benz announced that it would increase investment in internal combustion engine models.
At the legislative level, the EU's attitude towards the "ban on combustion" is also wavering. According to foreign media reports, after exempting synthetic fuels, the largest legislative group in the European Parliament - the European People's Party (EEP) - recently said it would seek to weaken the EU's plan to phase out carbon dioxide-emitting cars by 2035. The EEP hopes to revise the "ban on combustion" and promote the EU to "develop the most advanced internal combustion engine technology".
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