Welcome to issue number 16 of the Just Auto magazine
Challenges stack up for market demand in 2023
Market geography has never been more important – at first sight – than right now. The mature markets and non-mature markets highlight very divergent trends that will be shaping operational performances for companies in the sector in 2023.
Companies such as Volkswagen have benefited from stronger sales in China (although Covid-19 policy public health effects pose a major risk there). Others (notably Japanese OEMs) have seen volume lifts from higher sales in other Asian markets, especially in southeast Asia. But problems of tight supply remain an issue in mature markets such as North America and Western Europe. Moreover, the overall dent to the global volume pie remains large, with 2022’s global market at under 82 million and some 14% below 2017’s peak when it seemed to be heading inexorably towards 100 million a year.
There are indications, however, that the worst of the semiconductors shortage is now behind us with a gradual easing in prospect. One upside of backed up orders is that activity in factories can be ‘smoothed’ just as the emphasis switches to broader demand concerns and slowing economies due to a toxic combination of surging energy prices, lower household incomes, higher interest rates and significant ongoing geopolitical worries (all of which look set to be with us in 2023).
The demand outlook at this stage in what would normally be a relatively familiar industrial cycle is disappointingly weak. The latest LMC Automotive forecast for 2023 is for a global light vehicle market of 84.4 million, barely an improvement on an already depleted base.
The big question is this: Will companies have to make significant changes to their global manufacturing footprints? It hasn’t really happened yet, but the drop-off in volumes from 2019 is large and tinkering with model-mix has its limits as demand weakens. The OEMs will be reluctant to act, but the pressures will be building next year, especially if risks start to rise on the 2024 outlook. If the divergent trends in the global market continue, the mature markets will be the ones that feel the pressures most.
In the background, trends towards more automation and plants that require fewer workers to assemble EVs will add to the general feeling that a shake-out is coming. No-one wants ultimately to be a laggard in adjusting – the pain could be greater if there’s a competitive loss on top of a sectoral one.
2023 is going to be another year in which we all face significant challenges. My best wishes to all.
Dave Leggett, Editor