Car industry may recover after 10 years

Published by rudy Date posted on April 7, 2009

HONG KONG (Reuters) — Global car and truck sales will take more than a decade to recover to their 2007 peak as the sector faces a recession that’s likely to be deeper than in the 1970s and ’80s, auto industry author Graeme Maxton said on Tuesday.

However, car sales are likely to remain strong in China — which in January surpassed the United States to become the world’s largest auto market — and bounce back quickly in India, helped by the introduction of very low cost cars, Hong Kong-based Maxton said.

“Demand for smaller, cheaper cars should be more robust in the mature markets, too,” Maxton said in a press statement. “Sales of buses and trucks will also return to more normal levels sooner, as businesses begin to reinvest. That may not offer much comfort to most car makers in Europe, Japan and America over the next decade, however.”

He projected that global vehicle sales will drop to 53.8 million in 2010, from a peak of 71.7 million in 2007, and in 2020 will have rebounded to only 67 million.

Since Western consumers have borrowed too much and are seeing the value of their homes evaporate, Maxton said many will need to focus on rebuilding their savings before buying a new car, even when the economy recovers.

He is co-author of two best-selling books on the auto industry: “Driving over a cliff?” and “Time for a model change,” which was published in 2005 and predicted current problems in the car industry.

Baby-boomers, born in the 1950s and 1960s, were the biggest buyers of new cars in the past but will be especially frugal now because they will have little time to replenish their pensions, he said.

Plunging demand amid the global economic downturn, coupled with credit problems stemming from the global financial crisis has created turmoil in the auto industry, forcing a string of big names including General Motors Corp. to seek government aid in an effort to avoid bankruptcy.

Car sales are typically hard hit by economic recession, said Maxton, noting that US car sales fell 30 percent and took a decade to recover from the 1973 oil shock. After the next peak in 1986, they dropped 23 percent and took 13 years to recover.

“In Japan, South America, South Korea and much of Southeast Asia, sales volumes have been structurally transformed by recessions,” he said. “Japanese and South Korean sales have never returned to their pre-crisis peaks.”

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