Capacity Needs in the Automobile Industry in the Short- to Medium Run

This paper aims at identifying which countries and regions in the world might face structuralovercapacities or capacity shortfalls in the automobile industry in the near future. It discusses the mainforces that are likely to shape car demand over the next several years, including GDP growth, oil pricesand competitiveness. It also presents projections for car sales and production in 56 OECD and non-OECDcountries, distinguishing between temporary developments related to the cycle and more persistentpatterns. The paper shows that most countries might need to build capacity in the medium run, with majordifferences across regions though. A comparison of projected production levels in 2020 (between 125 and130 million cars worldwide) with actual capacity in 2012 indicates that additional production capacity ofaround 35 to 40 million cars needs to be built over the next eight years. The countries with the biggestprojected need to expand capacity over the projection period are India and China. While car demand maybe sufficient to clear excess capacities in Europe as a whole in the medium run, overcapacity may persist ina few countries, in particular Italy and France. Reducing overcapacity in these countries might be difficultwithout substantial improvements in competitiveness.