WORLD CAR OWNERSHIP RISING
Manager Research, PAGE
Jan 14 - 20, 2008
International Road Federation recently released data on passenger car ownerships for the year 2005 and forecasted the same for the upcoming periods. The figures have been so far quite rosy and have been forecasted to increase in the coming years as well on account of increase in disposable income of the individuals.
Over the decade 19942004, approximately five times more passenger cars appeared on the road than did commercial vehicles. However, there have been recently observed increases in lorry volumes. In volume terms, Western Europe has seen the fastest increase over the ten-year period, increasing by over 9 million vehicles. Developing countries, nevertheless, accounted for more than half of the increase over that same period. In terms of percentage growth, the expansion in developing countries has been even more dominant, with South Asia and Southeast Asia increasing at more than 8% p.a. Interestingly, Chinese expansion has remained modest.
2004 / 2005
CAR OWNERSHIP (MILLIONS)
CARS / 1000
Middle East & Africa
Former Soviet Union
Source: International Road Federation
When comparing the figures of 2005 with 2004 it shows that the number of cars has increased by 3% in the period under review from 694m units in 2004 to 714m units in 2005. Disintegrating the data shows, the major growth has been seen in the transition economies and developing countries where the sales went up by more than 7%. The least growth has been seen in the Organization for Economic Co-operation and Development (OECD) countries where sales only grew marginally by a percent to 510m units.
A vast discrepancy in ownership levels between countries comes into sharp focus. The highest Luxembourg, New Zealand and the US are all close to 600 passenger cars per 1,000 of the population, to the lowest many African nations, such as Ethiopia, Mozambique and Somalia that have less than one car per 1,000. When cumulative global population is superimposed upon the ranked figures, it underscores that there is not only an extreme gap between the highest and lowest, but that a deeper gulf exists between developed and developing countries. For example, only a little over 1 billion people (essentially OECD countries) enjoy car ownership levels at 200 per 1,000 or better. Put another way, 4.3 billion people, or two-thirds of the worlds population, currently live in countries with an average of less than 50 per 1,000. Relatively distinct levels are associated with overall development. OECD countries typically enjoy ownership levels of over 400 per 1,000, and then come transition economies, in a broad range of 200400 per 1,000, followed by the more economically advanced developing country regions such as Latin America and Southeast Asia, typically in a range of 100300 per 1,000. The lowest ownership levels arise in the poorer countries of Asia and Africa.
Among commercial vehicles, the distribution of ownership is nowhere near as smooth or as obvious for passenger cars, and involves far less of a uniform association with wealth levels. There are some developing countries, such as Libya, Kuwait and Thailand, which have ownership levels per 1,000 of the population that are higher than the average in Western Europe. Indeed, in Southeast Asia the average commercial vehicle ownership per capita is practically on par with that for Western Europe.
PERFORMANCE OF PAKISTAN
The auto industry in Pakistan has been fast growing and may soon begin to achieve economies of scale. It was passing through the most profitable phase in its history. However, liberalization of the auto sector in the past years at a time when the industry was heavily involved in investment and development of technology deterred its growth. The automobile sector of Pakistan witnessed significant growth in the last couple of years. Sales performance of different segments depicted a double digit CAGR. Sale of cars registered a CAGR of 30% from 62k units in FY 02-03 to 165k units in FY 06-07. Motorcycle sales registered 30% CAGR from 162k units to 467k units in FY 06-07. Such improved numbers were only possible because of the car financing schemes. Low interest rates forced commercial banks to focus on consumer financing in order to add-on to their tumbling interest based income. Car financing helped push car sales during the last couple of years. According to media sources, the number of vehicle sold through car financing account to 70% of the total.
IFR forecasts over two-thirds of the increase in car ownership to 2030 is in developing countries. Of these developing countries, 63% of the increase comes from Asian countries. By 2020, for example, China will have more cars than are currently on the road in Japan. Although the majority of cars will still be in OECD countries over the projection horizon, the share of developing countries in the global car park rises from 21% in 2005 to 40% by 2030, with this share expected to continue rising. The total stock of cars rises from just over 700 million in 2005 to 1.2 billion by 2030. The rapid growth of car ownership in developing countries dominates the outlook. Car ownership in developing countries rises from an average of 30 per 1,000 in 2005 to 72 per 1,000 by 2030. OECD ownership levels continue to grow, but at only slow rates, as saturation increasingly limits the potential for increases. By 2030, however, there is still an average of seven times more cars per 1,000 in the OECD than in developing countries.