Auto production slower in 2014, but still healthy

Global light vehicle sales were up 3.8% in 2013 according to LMC data.  Growth in 2014 might be a little slower, mainly due to slower growth in China after explosive gains in 2013, but should still be healthy.

Light vehicle sales were a mixed bag over 2013.  While China grew very strongly at over 14%YoY and the US made solid gains, Europe went backwards by ~2% and sizeable markets like India dropped by 12%.

The early read on 2014 auto production in key large markets is that things continue to grow on aggregate, albeit at a slower pace.

Growth in sales and production in January was 6%YoY, which is a strong number given how large this market now is, but is certainly down from the 15-20%YoY growth rates seen in the later stages of 2013.

US production and sales growth has also slowed from the healthy rates seen in 1H13.

Japan has strengthened into year end, although there is some uncertainty about how the auto sector maybe affected by rising consumption taxes.  Taxes on cars shouldn't go up so much as other taxes will be reduced as an offset. But uncertainty surrounds Japanese consumers as taxes rise at the start of April.

European markets were also noticeably better in 2H13 after a disastrous start to the year.  For sales to only be down 2% for the year as a whole was a good result given the momentum coming into the year.  Production levels also still look fairly low, not withstanding growth in the last 3 quarters. Leading indicators suggests auto demand and production should continue to rise in the coming 6 months.

There are also better signs for commercial vehicle markets in Europe, with Volvo truck sales (which is fairly representative of the market as whole) rising in a similar pattern to other industrial goods.

Some of this is probably driven by new regulations on emissions for 2014, as well as incremental demand.  Either way, it is positive for platinum usage given higher PGM loadings under these standards.

Commercial vehicle sales in China are part of demand which is relatively sensitive to credit availability and may give some clues as to whether tighter monetary policy is biting hard.

So far these have started the year off on par with 2013 levels, which is weaker compared to the momentum seen at the end of last year.  This is weaker than passenger vehicles, which seem more immune to tighter credit, growing 7%YoY.

So the outlook for autos looks fairly good for 2014.  Growth in Europe should be stronger than the ~2% suggested by some, while the signs for China so far are still good off a high base.  Growth in the US has been wobbly in the past few months, but should still rise ~3% or so.  So total growth probably won't eclipse the 3.8% seen in 2013, it should still be ~2.5-3%.