Vehicle Demand – Driving The Future

The automotive industry and more specifically “new passenger vehicle sales” statistics serve good indicator when assessing the health, strength and stability of global economic growth. New car sales are clearly correlated with global macroeconomic conditions, as they provide unquestionable evidence of general market sentiment and consumer spending tendencies. Total global passenger car sales increased by 47% between 2005 and 2015, with developing nations providing the majority of this appetite and developed nations by and large sustaining consistent gains. This growth has undeniably had positive implication for global petrochemical markets as the vast majority of vehicle components and fuels are in one way or another derived from the multitude of products that make up the Specialised sphere. So the questions are, who is buying these cars and what effects will it have on the Specialised Products Markets in the future?

To understand why these questions are pertinent, we must take a step back and access automotive industries reliance on Specialised Products, as it spans from seats to tyres, engine components and the fuel required for upkeep and use. In fact petrochemicals and their derivatives contribute more than one third of the raw material cost of producing the average vehicle. On top of this, as stringent governmental environmental policy increases its global presence, the role of fuel blending and biofuels is becoming existentially more important and hence automobiles are increasingly dependent on Specialised Products from “cradle to grave”. With this in mind, clearly increased consumer demand for new vehicles provides an attractive prospect for all those involved in downstream production.

So what is the demand landscape? Whilst global economic stability is by no means secure, with fears and tension brewing in Brazil, China, the US and Europe, new passenger car sales have increased at an average rate of 4% year on year since 2005. The vast majority of this demand growth is centered on China, where passenger vehicle sales increased by 433% between 2005 and 2015 and this translates to an average yearly gain of 19%. If we relate this to Chinese GDP, which grew at a rate of “merely” 6.9% in 2015 we can see that average passenger vehicle demand is far outperforming GDP growth. This growth in vehicle demand is not only driven by a burgeoning middle class but also technology, which has enabled manufactures to produces vehicles that are affordable and usable to a broader array of the population. As the last addition of this report highlighted, Chinese Specialised products demand grew at 8% last year and a large part of this growth can be attributed to vehicle manufacturing and maintenance, hence the visible upward trajectory provides a positive indication for cargo demand into China. At the same time in India demand has increased at an average rate of 10% per annum over the period in question. Whilst this relates to a smaller number of vehicles than China, it is still a phenomenal number of new vehicles. With both these key developing economies clearly exhibiting an enormous appetite for new vehicle consumption, and the U.S. and Europe maintaining growth, Petrochemical related production faces a healthy outlook.

The above has nothing but positive connotations for the Specialised products market. As global population growth continues and people have higher disposable incomes, these fundamentals paint nothing but a bright future for the automotive industry and its supply chain.

blog josh

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