The automotive trade is anticipated to develop within the coming years, regardless of the unstable macroeconomic backdrop. World automotive gross sales in 2023 are forecast to high 69 million, fuelled by better penetration in rising markets, rising adoption of electrical autos and the reopening of China following its leisure 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 can be impacting gross sales and manufacturing. We count on automotive 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 dwell in Asia Pacific, the Center East and Africa (MEA) or South America, but these areas mixed have fewer automobiles than North America and Europe. We count on to see a few of this potential unlocked within the years forward, with larger penetration in each automotive gross sales and automotive aftermarket classes.Â
Regular progress within the automotive aftermarket
Value-conscious motorists in Western developed economies are more and more reluctant to commerce of their automobiles for newer fashions, creating the chance for progress of their automotive aftermarkets. There are three principal components driving this market saturation:
- higher high quality and longer-lasting automobiles,
- robust second-hand automotive markets
- and shoppers ready for the value of electrical autos to drop to allow them to change.Â
The typical age of a automotive in Europe is now 12 years, in contrast with simply 7.4 years in 2014. In North America, too, the common age of automobiles has crept up, from 11.4 years in 2014 to 12.2 years in 2022. With a mixed whole of over 750 million passenger automobiles in operation on the 2 continents, this client conduct is anticipated to result in better demand for tires, spare components and automotive chemical compounds.
Certainly, the worldwide automotive aftermarket grew by 3% to $64 billion in 2022, with regular progress throughout all classes and all areas, apart 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 automotive chemical compounds by a strong 8%.
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Income was additionally 10% up on pre-pandemic ranges, most noticeably for automotive 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 on account of current spikes in transport and commodity prices, fairly than demand, which fell in most areas in 2022 and in each class apart from automotive chemical compounds. Bucking the development had been MEA and Rising Asia, the place each income and gross sales quantity noticed double-digit progress in 2022, one other indicator of potential being unlocked in rising markets.
The automotive aftermarket was actually not proof against the impacts of the cost-of-living disaster, nonetheless. Following a buoyant 2021, progress slowed steadily all through 2022 and particularly in This fall as motorists felt the double pinch of excessive power and meals costs.
Tire developments: massive and funds
All-season tires and people with the largest rim sizes continued their robust progress trajectory, pushed by the rising urge for food around the globe for greater automobiles. We’re seeing innovation which means shoppers not need to buy separate units of winter tires in areas the place winter climate is just not usually harsh. For shoppers, this implies price financial savings as they alter their tires as soon as every year whereas paying the next price 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 progress is principally being pushed by the US market the place there’s a larger saturation of larger automobiles.
Passenger automotive tires, although nonetheless dominating the market, carried out weakly by comparability, up only one% on 2021 and there was no progress in 4×4 tires over the yr.
Funds manufacturers for automotive tires grew throughout most areas, particularly Latin America and the US, as shoppers tightened their belts in response to inflationary pressures. One more reason behind funds model progress is availability. In the course of the pandemic funds manufacturers particularly from China seemed for progress in different areas, leading to larger shares in market. When these markets reopened, shoppers with restricted budgets went in search of one of the best offers. As a long run development, medium and funds manufacturers have elevated their distribution in addition to costs and can seemingly proceed cannibalizing the premium share.
Usually this meant a decline or solely very modest progress in premium manufacturers. The exception was in MEA which noticed double-digit progress in any respect worth ranges, led by robust premium model progress.
There have been worth hikes for tire manufacturers throughout the board, particularly funds 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 out there at low-end costs.
Small and artificial engine oil developments
World engine oils noticed robust year-on-year income progress of 6.6% in 2022, pushed principally by worth will increase. There was additionally modest year-on-year unit progress 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.
Absolutely artificial oils that supply higher efficiency and comfort at the next worth continued their upward development to command 54% of the market, and we count on this premiumization to proceed in 2023.
One other development we registered was the rise of smaller manufacturers, similar to Idemitsu and Motul, who proceed to encroach in the marketplace share of bigger market leaders. Nevertheless, the 2 largest firms mixed nonetheless have a 29% stake available in the market.
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 the direction of the tip of the yr, however uncertainty stays relating to future costs on account of excessive market volatility.
E-mobility developments: sustainability and effectivity
Battery-electric and plug-in hybrid autos accounted for 13% of worldwide automotive gross sales in 2022 in contrast with 8% in 2021, as key markets pressed on with targets to section out inner combustion engines over the following 20 years. Virtually six out of 10 shoppers say they are going to take into account a hybrid automobile as their subsequent buy and the relentless march in the direction of electrification may be seen in metrics similar to world income from electrical automobile automotive tires which jumped up by greater than 1,000% between 2019 and 2022.
The electrical automotive trade may see excessive ranges of progress over the approaching years. For good 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 rising stress to chop carbon and optimize logistics to mitigate inflation, there’s additionally rising curiosity in environment friendly electrical fleet autos that cut back the whole 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 automotive trade are prone to face in 2023. Inflation, meals and power prices will proceed to be on the forefront of shoppers’ minds, pushing them towards extra inexpensive merchandise.
Nevertheless, premium segments that supply efficiency and comfort, similar to all-season, greater rim sizes and artificial oils, will proceed to gasoline progress. Rising economies will provide alternatives for good producers whereas China’s reopening will help the sector’s resilience. In the meantime, the sustainability crucial will reward modern manufacturers whose merchandise reply to mounting regulatory and client stress for extra environmentally pleasant alternate options.
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