Although the US economy contracted in Q4, all is not doom and gloom as far as the auto markets – and ensuing metal demand – is concerned. Catch up on the start of our argument in Part One here.
Turns out the February Chicago PMI exceeded expectations, edging up 0.2 points to 59.8 and pointing to growth in the coming months. Given that the average age of U.S. vehicles is at a historic high of nearly 12 years+, up to 1.5 million new drivers a year are expected to enter the market over the next five years, and U.S. sales should be sustained at a relatively high level for some years to come.
Speaking of pent-up demand; auto sales may finally be turning a corner in Europe as sales registered a small 2 percent rise recently.
Sales in Europe fell in 2013 to a level not seen since 1995, an FT article reports, as all major markets apart from the UK and Spain faltered. But last year, Europe ended with four months of auto sales growth, and 2014 began on a positive note.
The fall in sales has disproportionately hurt mass-market players such as Fiat, Peugeot and General Motors, as average-income households cut back, but favored more value-focused manufacturers such as Kia and its South Korean sister brand, Hyundai.
Meanwhile, premium brands have continued to do well with Jaguar Land Rover expanding rapidly and handsomely repaying Indian Tata’s purchase of the firm, while Audi, BMW and Mercedes continue to mop up four out of every five luxury car sales in Europe.
Globally, auto production is at a record and positive growth in Europe, albeit from a very low base at present, will help offset any temporary slowdown in US production if buyers fail to be induced back into showrooms this spring.