The automobile business is predicted to develop within the coming years, regardless of the unstable macroeconomic backdrop. International automobile gross sales in 2023 are forecast to prime 69 million, fuelled by higher 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 supply some resilience to the cost-of-living disaster and provide chain issues which might be impacting gross sales and manufacturing. We count on automobile gross sales to rise additional to 74 million in 2024, persevering with the upward trajectory we’ve got 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 reside 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 automobile gross sales and automotive aftermarket classes.
Regular progress within the automotive aftermarket
Price-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 elements driving this market saturation:
- higher high quality and longer-lasting automobiles,
- robust second-hand automobile markets
- and shoppers ready for the value of electrical autos to drop to allow them to change.
The typical 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 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 shopper habits is predicted to result in higher demand for tires, spare elements and automobile chemical substances.
Certainly, the worldwide automotive aftermarket grew by 3% to $64 billion in 2022, with regular progress 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 elements by 6% and automobile chemical substances by a strong 8%.
Income was additionally 10% up on pre-pandemic ranges, most noticeably for automobile elements, 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 because of latest spikes in transport and commodity prices, somewhat than demand, which fell in most areas in 2022 and in each class aside from automobile chemical substances. 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 definitely 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 vitality and meals costs.
Tire traits: huge and price range
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 larger automobiles. We’re seeing innovation which means shoppers not need to buy separate units of winter tires in areas the place winter climate will not be sometimes harsh. For shoppers, this implies value financial savings as they modify 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. Nonetheless, this progress is especially being pushed by the US market the place there’s a larger saturation of larger automobiles.
Passenger automobile 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 12 months.
Price range manufacturers for automobile tires grew throughout most areas, particularly Latin America and the USA, as shoppers tightened their belts in response to inflationary pressures. One more reason behind price range model progress is availability. Throughout the pandemic price range manufacturers particularly from China appeared for progress in different areas, leading to larger shares in market. When these markets reopened, shoppers with restricted budgets went in search of the very best offers. As a long run development, medium and price range manufacturers have elevated their distribution in addition to costs and can seemingly proceed cannibalizing the premium share.
Generally 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 value ranges, led by robust premium model progress.
There have been value hikes for tire manufacturers throughout the board, particularly price range traces, 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 traits
International engine oils noticed robust year-on-year income progress of 6.6% in 2022, pushed largely by value 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 provide higher efficiency and comfort at the next value 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, akin to Idemitsu and Motul, who proceed to encroach in the marketplace share of bigger market leaders. Nonetheless, 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 direction of the tip of the 12 months, however uncertainty stays relating to future costs because of excessive market volatility.
E-mobility traits: sustainability and effectivity
Battery-electric and plug-in hybrid autos accounted for 13% of worldwide automobile 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’ll think about a hybrid car as their subsequent buy and the relentless march in direction of electrification might be seen in metrics akin to world income from electrical car automobile tires which jumped up by greater than 1,000% between 2019 and 2022.
The electrical automobile business might see excessive ranges of progress over the approaching years. For sensible automakers and their tier 1 suppliers, there are alternatives to innovate within the rising software-defined car (SDV) house with new software-centric options and capabilities that enhance security, comfort and the in-vehicle expertise. As companies come below growing stress to chop carbon and optimize logistics to mitigate inflation, there’s additionally rising curiosity in environment friendly electrical fleet autos that scale back the whole value of possession.
Outlook for 2023
Managing excessive inventories and navigating market value volatility of uncooked supplies are among the many challenges the automotive aftermarket and automobile business 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 inexpensive merchandise.
Nonetheless, premium segments that provide efficiency and comfort, akin to all-season, larger rim sizes and artificial oils, will proceed to gas progress. Rising economies will supply 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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