Editor’s note: Today’s Asia Wealth Investment Daily is written by Brian Tycangco, who recently joined us here at Stansberry Churchouse Research. Brian has more than two decades of experience analysing Asian companies and stocks – and he’s incredibly good at it. From his base in Manila, in the Philippines, Brian has wandered all over the continent in search of exciting investment ideas. I’m thrilled that he’s joined our team – and I’m sure you will be too. This is Brian now…
This urgent briefing reveals why we could be just days away from seeing multiple “ten-bagger” gains. Learn more here.
Car sales in the world’s two biggest car markets, China and the U.S., are big news.
Together, these two markets account for over 47 million cars sold worldwide. That’s nearly 60 percent of the global car market.
But they’re big news for the wrong reason.
After years of growth, car sales in China increased just 3 percent in 2017. Meanwhile, in the U.S. they fell by 1.8 percent.
Declining U.S. car sales are a result of banks tightening lending standards on auto loans for seven straight quarters.
Meanwhile, Japan, the world’s third-largest market, had a good year with 5.3 percent higher sales than 2016, thanks largely to consumer excitement over new models, and the popularity of electric vehicles and hybrids.
During a recent visit to Japan, I noticed far more Teslas, Nissan Leafs and Priuses than ever before.
Even the car rental company that I used had a long list of hybrids and all-electric cars to choose from.
As for Germany, the fourth-largest car market, growth there clocked in at a modest 2.7 percent.
What is clear is that the global car industry has hit a peak after five to seven years of breakneck growth.
However, one country is bucking the trend…
Indian car sales are on fire
I’ve been skeptical of India in recent years, because of its inability to carry out much-needed reforms.
But under the leadership of Prime Minister Narendra Modi, the world’s largest democracy seems to be making marked progress.
Of 30 major reform programs initiated by Modi since he took office, he’s delivered on nine of them, including four focused on infrastructure.
These include removing most restrictions on foreign investment in construction projects, as well as allowing 100 percent foreign direct investment in India’s decrepit railway sector.
Road construction is booming, with the Ministry of Road Transport and Highways looking to expand the national highway network by 20,000 kilometers (66 percent) over just the next two years.
With all the new roads and highways popping up, it’s no surprise more people in India are catching motor fever.
And with a household debt-to-GDP of just 9.7 percent, they have the financial wherewithal to buy new cars. That compares to 80.1 percent in the U.S., 58.6 percent in Japan, and 48 percent in China.
Indians just needed a good reason to buy cars – like having enough roads to drive on. And now, increasingly, they do.
Last year, India’s growing middle class pushed passenger car sales up 8.8 percent, to 3.27 million.
That put India ahead of the United Kingdom to become the world’s fifth-largest car market.
The fastest-growing major car market in the next three to five years
While India’s car market is still a far cry from China and the U.S., it will likely be the single brightest spot in the global car industry over the next three to five years.
That’s because India’s car penetration is still a fraction of its global counterparts.
At only 50 cars per 1,000 people, India will have to sell 104 million new cars (that’s more than 30 times last year’s sales) just to reach the same level of penetration as China.
I’m already seeing the same kind of takeoff growth in India that I saw happening in China in the early 2000s.
In March alone, Indian passenger car sales grew 12 percent year on year.
That puts the country on track to surpass Germany to become the world’s fourth-largest car market by the end of 2018.
This is clearly one market to keep an eye on.
Editor, Stansberry Churchouse Research