The automobile trade is predicted to develop within the coming years, regardless of the unstable macroeconomic backdrop. International automobile gross sales in 2023 are forecast to high 69 million, fuelled by higher penetration in rising markets, rising adoption of electrical automobiles and the reopening of China following its rest of Covid-19 restrictions. When coupled with constant manufacturing quantity and the sector’s demand backlog, these alternatives provide some resilience to the cost-of-living disaster and provide chain issues which might be impacting gross sales and manufacturing. We anticipate automobile gross sales to rise additional to 74 million in 2024, persevering with the upward trajectory we now have seen since 2020 towards the degrees attained within the years earlier than the pandemic.
Untapped potential in rising economies
Greater than 85% of the world’s inhabitants stay in Asia Pacific, the Center East and Africa (MEA) or South America, but these areas mixed have fewer vehicles than North America and Europe. We anticipate to see a few of this potential unlocked within the years forward, with greater penetration in each automobile gross sales and automotive aftermarket classes.Â
Regular development within the automotive aftermarket
Price-conscious motorists in Western developed economies are more and more reluctant to commerce of their vehicles for newer fashions, creating the chance for development of their automotive aftermarkets. There are three principal elements driving this market saturation:
- higher high quality and longer-lasting vehicles,
- robust second-hand automobile markets
- and shoppers ready for the worth of electrical automobiles to drop to allow them to swap.Â
The common age of a automobile in Europe is now 12 years, in contrast with simply 7.4 years in 2014. In North America, too, the typical age of vehicles has crept up, from 11.4 years in 2014 to 12.2 years in 2022. With a mixed whole of over 750 million passenger vehicles in operation on the 2 continents, this shopper habits is predicted to result in higher demand for tires, spare components and automobile chemical substances.
Certainly, the worldwide automotive aftermarket grew by 3% to $64 billion in 2022, with regular development throughout all classes and all areas, aside from China and Developed Asia.
Tires, which account for nearly three-quarters of aftermarket gross sales worth, had been up by 2% in 2022, spare components by 6% and automobile chemical substances by a strong 8%.
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Income was additionally 10% up on pre-pandemic ranges, most noticeably for automobile components, which noticed a 20% enhance between 2019 and 2022.
The expansion within the aftermarket is pushed largely by post-pandemic mobility and better product costs attributable to latest spikes in delivery and commodity prices, somewhat than demand, which fell in most areas in 2022 and in each class aside from automobile chemical substances. Bucking the pattern had been MEA and Rising Asia, the place each income and gross sales quantity noticed double-digit development in 2022, one other indicator of potential being unlocked in rising markets.
The automotive aftermarket was definitely not proof against the impacts of the cost-of-living disaster, nonetheless. Following a buoyant 2021, development slowed steadily all through 2022 and particularly in This autumn as motorists felt the double pinch of excessive vitality and meals costs.
Tire developments: massive and finances
All-season tires and people with the most important rim sizes continued their robust development trajectory, pushed by the rising urge for food around the globe for greater vehicles. We’re seeing innovation which means shoppers not should buy separate units of winter tires in areas the place winter climate is just not sometimes harsh. For shoppers, this implies price financial savings as they alter their tires as soon as every year whereas paying the next charge for the service.
Mild truck tires had been a standout performer in 2022, rising by 5% on 2021 ranges and 22% vs 2019 amid elevated demand for logistics drivers and last-mile supply. Nevertheless, this development is especially being pushed by the US market the place there’s a greater saturation of larger vehicles.
Passenger automobile tires, although nonetheless dominating the market, carried out weakly by comparability, up only one% on 2021 and there was no development in 4×4 tires over the 12 months.
Funds manufacturers for automobile tires grew throughout most areas, particularly Latin America and america, as shoppers tightened their belts in response to inflationary pressures. Another excuse behind finances model development is availability. In the course of the pandemic finances manufacturers particularly from China seemed for development in different areas, leading to greater shares in market. When these markets reopened, shoppers with restricted budgets went in search of the perfect offers. As a long run pattern, medium and finances manufacturers have elevated their distribution in addition to costs and can seemingly proceed cannibalizing the premium share.
Normally this meant a decline or solely very modest development in premium manufacturers. The exception was in MEA which noticed double-digit development in any respect worth ranges, led by robust premium model development.
There have been worth hikes for tire manufacturers throughout the board, particularly finances strains, which took 21% of the gross sales worth share in 2022 in contrast with 17% in 2019. Tapping into the candy spot between tighter family budgets and the urge for food for SUVS, manufacturers additionally elevated the vary of large-rim tires accessible at low-end costs.
Small and artificial engine oil developments
International engine oils noticed robust year-on-year income development of 6.6% in 2022, pushed principally by worth will increase. There was additionally modest year-on-year unit development of two.2% though efficiency was barely weaker than pre-pandemic ranges.
Globally, gross sales worth was up 13% on 2019, with the best enhance seen in Europe and Rising Asia.
Totally artificial oils that supply higher efficiency and comfort at the next worth continued their upward pattern to command 54% of the market, and we anticipate this premiumization to proceed in 2023.
One other pattern we registered was the rise of smaller manufacturers, comparable to Idemitsu and Motul, who proceed to encroach in the marketplace share of bigger market leaders. Nevertheless, the 2 largest corporations mixed nonetheless have a 29% stake out there.
After the sharp rise in oil costs following Russia’s invasion of Ukraine in February, costs of worldwide engine oils started to stabilize at excessive ranges in direction of the tip of the 12 months, however uncertainty stays relating to future costs attributable to excessive market volatility.
E-mobility developments: sustainability and effectivity
Battery-electric and plug-in hybrid automobiles accounted for 13% of worldwide automobile gross sales in 2022 in contrast with 8% in 2021, as key markets pressed on with targets to part out inner combustion engines over the subsequent twenty years. Nearly six out of 10 shoppers say they may think about a hybrid automobile as their subsequent buy and the relentless march in direction of electrification might be seen in metrics comparable to international income from electrical automobile automobile tires which jumped up by greater than 1,000% between 2019 and 2022.
The electrical automobile trade may see excessive ranges of development over the approaching years. For sensible automakers and their tier 1 suppliers, there are alternatives to innovate within the rising software-defined automobile (SDV) house with new software-centric options and features that enhance security, comfort and the in-vehicle expertise. As companies come underneath growing stress to chop carbon and optimize logistics to mitigate inflation, there may be additionally rising curiosity in environment friendly electrical fleet automobiles that scale back the overall price of possession.
Outlook for 2023
Managing excessive inventories and navigating market worth volatility of uncooked supplies are among the many challenges the automotive aftermarket and automobile trade are prone to face in 2023. Inflation, meals and vitality prices will proceed to be on the forefront of shoppers’ minds, pushing them towards extra reasonably priced merchandise.
Nevertheless, premium segments that supply efficiency and comfort, comparable to all-season, greater rim sizes and artificial oils, will proceed to gas development. Rising economies will provide alternatives for sensible producers whereas China’s reopening will assist the sector’s resilience. In the meantime, the sustainability crucial will reward revolutionary manufacturers whose merchandise reply to mounting regulatory and shopper stress for extra environmentally pleasant options.
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