Car industry on high growth path

London: The car industry grew to a record size in 2011, despite weathering a year that began with Japan's earthquake and ended with a gathering sovereign debt crisis in the Eurozone.

Both IHS Automotive and LMC Automotive (formerly JD Power Automotive Forecasting) estimate that sales of cars and light trucks will have grown by about 4 per cent this year to 75 million.

Forecasters are predicting that car sales and production will grow further next year, but have trimmed their estimates because of worries about the impact Europe's debt crisis will have on demand.

The industry's 2011 expansion was much slower than the low double-digit growth rates carmakers saw in 2010, when they were rebounding from a crisis that prompted the biggest government bail-outs for any industry outside banking.

Market conditions

Eastern Europe, including Russia and Turkey, reported the fastest growth in car sales this year, followed by South America, according to IHS. The recovering car market in the US grew faster than China's cooling one, up nine per cent this year, the consultancy says, compared with China's five per cent.

"We are seeing North America grow more than China both in relative and absolute terms," said IHS analyst Christoph Stuermer.

In Japan, where the earthquake and tsunami disrupted carmakers' manufacturing operations and buying, the market contracted by more than 20 per cent this year.

IHS and LMC predict that Volkswagen will surpass General Motors and Toyotato become the industry's largest producer for the first time this year. However, their forecasts do not include GM's Wuling brand vehicles made by its Chinese venture with SAIC, which will give it the highest reported production in the industry.

Forecasts

IHS forecasts that light vehicle sales will grow a further four per cent in 2012 to nearly 78 million. LMC believes they will grow five per cent next year to just under 79 million.

The forecasts bode well for an industry that is sensitive to credit market conditions and consumer demand.

Western Europe's car market, which was flat this year, will contract by about five per cent more next year, forecasters say.

Christian Klingler, VW's head of sales, said on Friday that the company was "preparing for a very challenging year in 2012".

Arthur Maher, LMC analyst, said: "The European carmakers are bracing themselves for a recession, and the downturn may be more severe in the first half of the year."

— Financial Times