Moody's: Global auto sales to rebound modestly in 2016

Global auto sales will improve in 2016, with steady growth in the US and strong sales in Western Europe mitigating sharply lower sales in Japan and slowing growth in China, says Moody's Investors Service. As a result, the rating agency maintains its stable outlook for the global automotive manufacturing industry.

Moody's forecasts global light vehicle sales of 2.5% in 2016, an improvement from 1.2% in 2015. Despite its slowing economy, China will be a significant driver of this growth, as a looser monetary policy and stabilizing real estate market push Chinese auto sales to comprise 27.8% of global auto sales in 2016, up from 27.1% of sales in 2015.

Although economic conditions remain challenging in China, Moody's expects the auto market to recover, with auto sales growth expected to reach 5.0% in 2016, up from 1.9% in 2015, according to the report "Global Automotive Manufacturers: Auto Sales to Rebound Modestly in 2016 After China Growth Slowdown".

In addition, steady growth in the US will help boost global auto sales. Although the pace of growth has slowed in the US, it remains broadly steady, slowing only slightly to 2.4% in 2016 from 2.8% in 2016.

Higher new sales growth in Europe will also contribute to the rebound in global auto sales, with sales rising 6.0% in 2015 and 2.8% in 2016. Despite Moody's forecast for low economic growth in the euro area, double-digit demand in Spain and higher-than-expected growth in Germany, the UK, France and Italy will boost sales in the region.

However, the sharp contraction in sales growth in Japan in 2015 will offset global growth to a degree. Although Moody's expects sales to stabilize in 2016, they will fall 7.5% in 2015, the result of a 50% tax increase on compact cars.

Furthermore, declining auto sales in Brazil and Russia will place a further drag on auto sales growth, although a rebound in India will somewhat mitigate the effect in BRIC countries.

"Although key auto markets are demonstrating very different rates of growth, aggregate global demand should continue to support a stable outlook," said Bruce Clark, a Moody's Senior Vice President. "The pronounced variance in regional demand patterns highlights the benefits of auto manufacturers maintaining a broad geographic footprint," Clark further noted.

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