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Rising Disposable Incomes in Emerging Markets Linked to Increasing Possession of Passenger Cars

3/6/2015
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Although ownership of passenger cars varies greatly across emerging markets, nearly every emerging and developing country saw their proportion of passenger cars per household rise from 2009-2014. This was strongly linked to a rise in annual disposable incomes per household in US$ terms in emerging markets from 2009-2014, triggering a rise in automotive sales in key countries such as China and Brazil.

Possession of Passenger Car and Annual Disposable Income per Household in Selected Emerging Markets: 2009/2014

Automotive-Possession-Rates

Source: Euromonitor International from national statistics

Highest levels of passenger car ownership found in emerging markets with greatest disposable income levels

  • The UAE had the biggest proportion of passenger car ownership of any emerging market in 2014 at 98.1% of all households, due to the extremely wealthy government, and generous benefits it gives its citizens, in addition to 0% tax on incomes. This meant the average disposable income per household stood at US$145,736, also the highest of any emerging market. The infrastructure and lack of public transport and footpaths in key cities such as Dubai mean that car is often the only viable means of transport. Kuwait and Qatar were similar oil based economies, and also had very high average disposable incomes per household, and near universal ownership of passenger cars at 97.0% and 96.0% of all households in 2014.

Rise in annual disposable income levels triggering car ownership

  • In some of the world’s key emerging markets like Brazil and China, rising disposable income levels are rising due to growth of population skills, and rising employment in service based industries. This is triggering an increase in passenger car ownership. China’s average per household annual disposable income rose from US$7,396 in 2009 to US$14,198 in 2014, boosting the proportion of passenger car ownership from 3.9% to 7.1% of households in the same time frame. Likewise Brazil’s rise from US$18,247 in 2009 to US$23,430 in 2014 prompted an increase in car ownership from 37.4% to 43.3%.

Capacity for long term growth

  • Passenger Car ownership remains very low in many emerging and developing countries, Kenya for example had car ownership of just 5.8% of households in 2014, due to an annual average household disposable income of US$3,462 in the same year. Cameroon and Vietnam also had extremely low car ownership of 6.6% and 2.0% in 2014 (although the latter had very high ownership of motorcycles, which are cheaper to run) due to low wages and economies that are still centred around primary industries such as agriculture. In the long term however, the rise in wealth in developing economies offers significant growth potential for autos, and other consumer goods industries such as packaged foods, due to the increased opportunities for bulk buying that passenger car ownership brings.

 

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