The vehicle industry is an important industry as it is linked to many other components industries such as metals, electronic parts, and tyres. This directly concerns the demand side of the rubber industry because around 70% of natural rubber consumption comes from the automobile industry (IRSG, 2020). Therefore, we could say that the vehicle industry is one of the key factors that influence rubber prices.
China is counted as one of the largest vehicle markets in the world, both in terms of sales and production. It accounts for around 32% of the world’s vehicles assembly (LMC, 2021), and China’s auto market has recovered quite remarkedly so far this year.
According to LMC’s monthly reports, car sales in China in Q1 2021 almost reached its pre-coronavirus levels. The sales recovered to 2.41 million units in January 2021 (MoM +27% from 2020), 1.38 million units in February 2021 (MoM +383% from 2020), and 2.34 million units in March 2021 (MoM +71% from 2020). Together, in Q1 2021, China car sales recovered 72.8% from the same quarter a year earlier. The auto sales in Q1 2021 are down merely by 1.7% from its pre-COVID-19 sales in Q1 2019.
The rapid recovery in China can be attributed to its government support and increased demand for personal/private mobility with individuals avoiding public transport or shared cars. Moreover, electric vehicles are the new trend in China’s auto market, and The Economist (2021) forecast that China’s EV market will grow 10% in 2021. This will support the sales of new vehicles in China to result in an expected YoY expansion of 6.8% (The Economist, 2021). Notwithstanding that, the current shortage of semiconductors is expected to hinder car production and sales in 2021.
On the other part of the world, although car sales in the US did not recover as much as the sales in China, it still had positive growth of 12.1% in Q1 2021 compared to Q1 2020. The Q1 2021 auto sales in the US is only 2.4% less than its pre-coronavirus 2019 sales over the same period.
However, the improvement of vehicle sales is uneven as we could see in the EU and the UK. Vehicle sales in the EU improved only 3.24% in Q1 2021 in comparison with Q1 2020, which is still 23.2% below its car sales in Q1 2019. In the UK, the sales even dropped 12.0% in Q1 2021 (QoQ). Comparing to pre-coronavirus 2019, the car sales in Q1 2021 in the UK is still down by 39.3%.
Recently, the UK and US have given first doses of COVID-19 vaccines to about 53% and 46% of its population, respectively (Ourworldindata, 13 May 2021). These vaccination efforts and related government policies may support the economic recovery, improve mobility and transportation movement which lead to a better demand for vehicle sales in the near future.