Who’s driving this ramshackle global jalopy anyway? How about 21 million Indians and Chinese? Ten years ago these two nations were unruly passengers in the back seat. Today, there can’t be much doubt left about where global growth (and corporate profits) are coming from in the already-here future.
“Asia overtaking US as biggest auto market,” reports the AFP. “Sales in the Asia Pacific region are expected to surpass North America for the first time this year as they approach 21 million vehicles…US sales are currently on pace to reach between 16 and 17 million vehicles this year. Growth in China, India and other emerging markets will push global auto sales to a record 70 million vehicles this year.”
We pause to wonder where all the petrol for these new cars will come. Hold that thought.
“If we go back to a decade ago, 80 percent of global sales were in the developed market of the US, Canada, Australia, Japan and Western Europe,” said GM’s chief sales analyst Paul Ballew. “So far this year it’s about 62 percent.” Most of the cars are dinky two-door commuter-mobiles where profit margins are low. But it won’t always be that way.
“As these markets become more prosperous the buyers will become more aspirational,” Ballew added. In marketing, an aspirational brand is a brand that people aspire to. The product itself may not be any better than a similar product with a different brand. After all, a car can only have four wheels and one steering wheel.
But buying aspirational brands makes certain people feel better about themselves…more intelligent, more hip, and of course, richer. This is the psychological transition to consumerism we are eagerly waiting to see in Asia. It comes when pent up savings are unleashed, or when consumer credit becomes widely dispersed.
When this tipping point from diligent saver to profligate spender is reached, whole new vast domestic industries become appealing for investors. Much of China and India are on the verge of this aspirational consumerism. It doesn’t really matter what you call it, though. The simplest word is opportunity.
The Daily Reckoning Australia