What will 2011 bring for the auto industry? On the demand-side, much depends on how the global economy shapes up. In that respect, developments in the US and in China are particularly significant. If the US economy performs as many commentators are expecting it to (they are pretty cautious, but expect some strengthening, especially in the second half), then the gradual rebounding of the US vehicle market should continue.

For China, the concerns surround signs of an overheating economy and efforts by the Chinese authorities to calm frenetic growth. A slowdown to vehicle market growth is widely expected, but how pronounced the slowdown will turn out to be is a big question. If the economy continues to grow at something like 10% a year, with inflation and asset bubble worries subdued, then the car market may continue to run at a very high level.

But the Chinese government may decide to take its foot off the fiscal stimulus pedal and that’s possibly a fine judgement to call if confidence generally starts to wane. After close to 18m units sold in 2010, there might be a bit of fizz in the vehicle market that quickly turns to slack if Chinese manufacturing activity stalls. But people said that last year and the market accelerated in 2010. Much depends on how China’s economy is managed and how Beijing pulls the appropriate policy levers. Confidence is key.

Another issue for China could be chronic congestion in major cities, which may start to see the authorities taking a less accommodating attitude to continued high growth in car sales. That’s definitely something to watch. Even people who are new to car ownership can be put off by epic traffic jams. And if that doesn’t put them off, rationing could be a measure that chokes off car demand very effectively (or causes a boom ahead of introduction…). 

CHINA: Beijing drastically limits new vehicle registrations in 2011

In Western Europe, the professional forecasters are saying that we will likely see a slight contraction versus 2010 as the market settles down after the scrappage boom of 2009 that also spilled into 2010.

Further east, look out for recovery in Russia. If Russia’s car market comes back, those who have invested in capacity there will breathe a big sigh of relief. But they will also have to take account of the Russian government’s changing attitude to the industry and foreign automakers. It will likely mean foreign brands with plants in Russia have to source more parts and content in Russia and do it more quickly than they would like. That’s going to be a big challenge for some. The devil may be in the detail.

Expect to hear even more about electric drive technologies in 2011. That is kind of inevitable. With the Chevrolet Volt (range extender) and Nissan Leaf hitting the market, we’ll get a feel for how far consumers really are prepared to embrace such new technologies.

But most of all, expect a few surprises ahead. Where can we look for them? Well, the shape of the global auto industry  – markets, major production centres, sourcing costs and regional specialisms – and the companies within it is pretty uneven. That creates plenty of opportunities for corporate restructuring of one sort or another – alliances, selective collaborations or, indeed, mergers and acquisitions.

Volvo Cars went to Geely last year. Jaguar and Land Rover went to Tata a few years back. We will likely see companies in emerging markets continuing to take steps on to the international stage in 2011. There are major growth opportunities out there and just serving your home market only gets you so far.

Anyway, whatever 2011 brings – and it will certainly be the usual mixture of the good, the bad and the ugly – I nevertheless wish everyone reading this a Happy New Year!

By the way, if you would like to skim through some highlights from the year just gone…

December 2010 management briefing: Review of 2010