Automotive 2040: Regions

The past decade has been a period of slow growth for the automotive industry at a global level. Sales have largely stagnated, increasing only marginally from around 88 million vehicles sold in 2015 to an expected 91 million in 2025. One major exception is China, which expanded dynamically, essentially becoming the main driver of the global automotive sector. In the period to 2040, volume growth will continue at a slow pace globally, probably around 1.1 percent a year. However, this figure will vary widely between different geographical regions.

China and the Global South will drive sales

Slow economic growth, aging populations and declining population sizes in Western markets, Japan and Korea mean that these markets have basically reached "peak auto" in terms of new vehicle sales, or will soon do so. The next decade and a half here will see slow but relentless decline. By contrast, vehicle sales in China are forecast to grow by around six million through 2040, although slower economic growth and declining population size will also have an impact on growth here. We predict that markets in the Global South – developing and emerging markets in Asia, Africa and Latin America, excluding China – will establish themselves as growth markets for automotive, thanks to a combination of stronger economic growth and a fast-growing young population. Thus, Southeast Asia will see a forecast increase of 4.6 percent a year, India 4.2 percent, Latin America 2.4 percent and the Middle East & Africa 2.1 percent.

Relative vs. absolute growth

Sales figures are only one side of the coin, however. For automotive players, the resulting revenue pools are more significant, especially given the major differences in sales prices and the vehicle segment split in different global regions. China offers by far the strongest revenue growth, at around EUR 590 billion in total potential new revenue pools (at manufacturer prices, excluding VAT and inflation) in the period to 2040. Markets in the Global South are expected to grow in terms of absolute revenue by around EUR 480 billion, but despite their strong growth rates compared to other regions, their share of the total market will only rise from 14 percent today to 20 percent in 2040. Thanks to their size, Europe, the United States and Canada will still show significant absolute growth, at an estimated EUR 520 billion in the period to 2040.

Strategic priorities through 2040

What approach should automotive players take in the different regions over the coming decade and a half? In the West, Japan and Korea, stagnating or shrinking volumes mean that revenue growth will only be possible by pushing up sales prices even further, continuing the shift towards higher vehicle segments and developing new revenue streams along the customer lifecycle. In China, by contrast, players can rely on growth being driven by increasing sales, creating a fast-expanding revenue pool. This will be accompanied by a further shift to higher vehicle segments and greater penetration of battery electric vehicles (BEVs).

In the Global South, high absolute growth in sales volumes does not equate to high growth in revenues due to the much larger share of smaller, less expensive entry-level vehicles sold. This is exemplified by the case of India, where at first sight the coming growth from around five million vehicles today to ten million in 2040 seems more than promising. But the market is dominated by entry-level vehicles, resulting in an average sales price less than one-third that of the United States. In the Global South, we therefore recommend that every automotive player should take a realistic view of the opportunities and challenges and then make a clear decision as to whether they wish to establish themselves there with an eye to the future.

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