Global growth in vehicle purchases will slow to 4.3% in 2024 as pent-up demand caused by the shortages of previous years is exhausted and tighter economic conditions take hold, says BMI autos and infrastructure research head Anna-Marie Baisden.
“Our global economists expect weak sentiment, tighter monetary policy and still high – although easing – inflation to weigh on domestic demand in 2024, which is likely to have a knock-on effect for big-ticket purchases such as vehicles,” Baisden noted during a webinar last week attended by Kallanish.
BMI expects the Middle East and North Africa to be the best-performing region in 2024 with a surge in vehicle sales of 17.1%, following 7.9% growth in 2023.
According to BMI autos senior analysts Joshua Cobb, electrification will also face growing headwinds from increased operating costs, reduced electric vehicle (EV) purchase subsidies and the price war. “This will spur new EV financing trends, increased risk of protectionism, manufacturing optimisation and new retail models. We expect the EV markets in large economies with high rates of EV adoption will move from the ‘first adopter’ stage to the ‘mass adoption’ stage in 2024,” he noted.
This will result in a more price-conscious consumer base which will require lower vehicle prices to promote continued electrification of road transportation, BMI claims.
The cost challenge will be heightened by the phaseout of EV purchase incentives, mainly in Europe, and imposition of EV charging fees and road-use taxes. This will be somewhat offset by the easing cost of batteries, Cobb continued.
BMI notes the EU and North America are aiming to decrease their reliance on China in their respective EV supply chains.
A number of key elections will be held in 2024, and these will have implications for the autos industry due to shifts in policies and geopolitical alignments, it notes. The ongoing Hamas-Israel conflict will also drag down the ability of importers to import vehicles for the Israeli, Palestinian and Jordanian markets, and increase risk to Egypt’s vehicle imports as well.
According to BMI, free trade agreements will be one of the most financially efficient ways for developing markets to attract EV-related investments in 2024 amid the ongoing subsidy war and supply chain de-risking trends. “Risks to vehicle production stemming from flooding, droughts and other severe natural disasters will endure in 2024,” it concludes.