Tata Motors Ltd. is dominating the chatter from Detroit to Delhi with its purchase of Jaguar and its $2,500 (U.S.) Nano car, but three old stalwarts are in the driver's seat as the centre of gravity shifts in the global automotive industry.
Even though Brazil, Russia, India and China are set to surpass the traditional locations of North America, Western Europe and Japan as the growth leaders in auto production, Toyota Motor Corp., General Motors Corp. and Volkswagen AG will likely be the most dynamic players - with a heavy assault mounted by some upstart challengers.
"The industry's epicentre is shifting to emerging markets from the mature markets of North American and Western Europe," said Carlos Gomes, Scotiabank economist and auto industry specialist, in his monthly outlook report on the auto industry.
Production capacity in the so-called BRIC countries will surge to 20 million vehicles this year, Mr. Gomes said, exceeding the 17.4 million vehicles that can be built in North America. In fact, almost 90 per cent of the new investment in assembly plants made in the past five years has been outside the three traditional markets, he said.
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The BRIC countries "share one characteristic; they all have a growing middle class," said Bill Pochiluk, president of consulting firm AutomotiveCompass Ltd.
The three leading contenders for domination in the emerging markets are building on lessons they have learned in countries where they have been selling for decades.
Toyota, for example, will start selling Camry sedans in Russia on Monday and they will roll out of a plant in St. Petersburg. The Camry also happens to be the highest-selling passenger car in the U.S.
Auto executives get dollar signs in their eyes at the mention of Russia. For one thing, output is expected to almost double by 2014 to 2.84 million vehicles from 1.49 million last year, according to auto consulting firm CSM Worldwide Inc. of Northville, Mich.
But the other key factor is that incomes are growing in Russia and there is a strong taste for larger vehicles that generate higher profits.
Explosive growth in India is expected to make that country the fastest-growing major production location into the middle of the next decade. AutomotiveCompass forecasts a 138-per-cent increase in output to 4.44 million vehicles annually by 2014, from 1.86 million last year.
But that growth will come mainly in small cars, which at $2,500 or even $3,000, don't generate the profits of a Camry or of a Buick, one of the most popular brands in China.
India is one of the few emerging markets where Toyota doesn't have a large manufacturing presence. But it's growing in Russia, Brazil, China and other emerging markets and has an environmental halo by virtue of being the first to offer a mass-market hybrid vehicle that reduces emissions and fuel consumption.
"They're everywhere with good stuff. They can deliver the goods everywhere," Mr. Pochiluk said.
He ranks GM second behind Toyota among the world's leading auto makers and those that want to dominate emerging markets. GM now generates 60 per cent of its sales outside its home market of North America. China is its second-largest market and Brazil is third.
Volkswagen, with its major presence in Brazil, China and Mexico, is considered to be No. 3 and has outlined a global expansion strategy to compete with Toyota for the No. 1 spot.
But lurking as a global threat is Hyundai Motor Co. of South Korea, which has a strong presence in India and Eastern Europe. It plans to start assembling vehicles in Russia and double output in China by 2014.
AUTOMOTIVE
BRIC v. West
TOTAL CAR SALES 1990-99 (Average annual sales)
South America: 4.18%
(Brazil: 2.4%)
Asia: 17.63%
(China: 0.84%
India: 0.79%)
Eastern Europe: 3.01%
(Russia: 2.0%)
Western Europe: 33.44%
(Germany: 9.11%)
North America: 41.73%
(Canada: 3.2%
U.S.: 37.12%
Mexico: 1.38%)
TOTAL CAR SALES 2008 (forecast)
South America: 6.78%
(Brazil: 4.08%)
Asia: 27.58%
(China: 10.73%
India: 2.36%)
Eastern Europe: 7.09%
(Russia: 4.6%)
Western Europe: 26.46%
(Germany: 5.76%)
North America: 32.09%
(Canada: 2.92%
U.S.: 27.18%
Mexico: 2.0%)
TRISH McALASTER/THE GLOBE AND MAIL
SOURCE: SCOTIABANK GROUP
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