China leads the fast-growing automobile market

Subject

Outlook for the automobile market.

Significance

Attention has been drawn to the automobile sector by US President Donald Trump's election and the UK decision to leave the EU. These developments are likely to strengthen the pre-existing ‘make-where-you-sell’ trend. Two other trends that are changing the automobile industry are the digitisation of vehicles and the tightening of emission standards.

Impacts

• Open US-China trade would help Chinese firms to sell cars as well as components in the United States, and help US firms sell more to China.
• However, there is also scope for disputed manufacturing tariffs that could harm Chinese and US automakers and strengthen Europe and Japan.
• Loosening US emission regulations would temporarily boost automakers' profits but risks leaving US manufacturers behind technologically.
• Tighter emission rules and consumer preferences for driver assistance are boosting powertrain electrification and vehicle digitisation.
• Europe has lost market share in global R&D to East Asia; Brexit is likely to accelerate this geopolitical shift.