Michael McKenzie of the PwC Automotive Institute forecasts that developing markets will account for 97% of the forecasted 1.9 million units of market expansion in light vehicle assembly in 2007. Assembly in North America will be pressured below 2006 levels as the ‘Detroit Three’ continue to correct inventories and manage product mix-related volume declines, and general softness in economic and housing growth will likely ‘ratchet-in’ consumer spending. PwC forecasts US sales to peak at 16.4 million cars and light trucks in 2007, the lowest in nine years.
However, for suppliers, new core products launched at Detroit this month display refocused efforts on interior refinement and functionality, as well as further advancements in vehicle safety and powertrain technologies, signalling increased spending on these crucial, competitively differentiating component sets. With growing emphasis on the shift eastwards in the EU, assembly in France will probably decline 5% in 2007, while assembly in Slovakia is expected to double to 540,000 units as PSA and Hyundai ramp up operations.
For those heavily exposed to mature markets, especially OEMs and ‘dependent’ suppliers already immersed in deep restructuring plans, 2007 promises to be a tumultuous year. Yet others will be seemingly impervious to the increased competitive intensity as they execute aggressive growth strategies.
OEMs of varying financial health are expanding and shifting assembly to both ‘BRIC’ (Brazil, Russia, India, China) and Central European countries to take advantage of their cost competitive characteristics. Beyond emerging markets, Japan and Italy are also poised to post significant volume gains thanks in part to indigenous manufacturer recoveries. Fiat will continue along its resurgent path in 2007, forecasted to grow 10% globally, after recovering 14% in 2006.