The growth rate of vehicle purchases, of both electric and combustion engines, are set to slowdown in 2024, as the pent-up demand caused by supply chain shortages in previous years exhausts, according to FitchSolutions’ BMI.

Tighter economic conditions will also put pressure on the automotive sector this year, BMI’s head of auto and infrastructure research Anna-Marie Baisden says in a webinar attended by Kallanish.

“Our global economists expect weak sentiment, tighter monetary policy and still high (although easing) inflation to weigh on domestic demand in 2024, which is likely to have a knock-on effect for big-ticket purchases such as vehicles,” notes the London-based analyst. “We also expect emerging markets to be more resilient compared with developed markets, which supports our forecast for the Middle East and North Africa (MENA) to be the best-performing region in 2024 with a surge in vehicle sales of 17.1%, compared with our forecast of 7.9% growth in 2023.”

According to BMI’s auto senior analyst Joshua Cobb, electrification will face growing headwinds from increased operating costs, reduced electric vehicle purchase subsidies and the price war. “This will spur new EV financing trends, increased risk of protectionism, manufacturing optimisation and new retail models. We expect the EV markets in large economies with high rates of EV adoption will move from the ‘first adopter’ stage to the ‘mass adoption’ stage in 2024,” he adds.

This will result in a more price-conscious consumer base which will require lower vehicle prices to promote continued electrification of road transportation, BMI claims.  

“The cost challenge to continued adoption will be heightened by the continued phaseout of EV purchase incentives (mainly in Europe), the imposition of EV charging fees and road-use taxes which will drive up the cost of EVs and cost of ownership,” Cobb notes. “However, the easing cost of batteries will also somewhat reduce the risk of higher EV prices in 2024 and will likely support the ongoing EV ‘price war’ throughout 2024.”

BMI adds that the EU and North America are aiming to decrease their reliance on China in their respective EV supply chains to increase critical mineral resource security; foster the development of their local EV supply chains; and protect Western OEMs from losing market share against Chinese competitors.

A number of key elections will be held in 2024, and these will have implications for the auto industry due to shifts in policies and geopolitical alignments, it claims. The ongoing Hamas-Israel conflict will also drag down the ability of importers to purchase vehicles for the Israeli, Palestinian and Jordanian markets, and increases risk to Egypt’s vehicle imports as well.

According to BMI, the free trade agreements (FTAs) will be one of the most financially efficient ways for developing markets to attract EV-related investments in 2024 amid the ongoing subsidy war and supply chain de-risking trends.