WCA May 2018

From the Americas

promise of doubling incomes over the current decade.” This, he wrote, implies an average annual growth rate for China of 6.3 per cent through 2020.

The global economy Taken together with higher capital spending, brisker trade suggests that the expansion in global growth is broad-based The investors newsletter Insights from T Rowe Price (Baltimore, Maryland) notes that growth “solidified” worldwide last year, with all major regional economies accelerating in unison for the first time in almost a decade. The publicly owned global asset management firm saw the most impressive pickup in growth in commodity exporters such as Brazil, Mexico and Russia, but Japan and major developed economies in Europe also performed well. The firm’s chief international economist, Nikolaj Schmidt, wrote: “Although we expect that growth [to] decelerate in 2018, we expect the global economy to carry much of its momentum into the new year.” (“Global Expansion Provides a Solid Footing for 2018 World Economy,” Winter 2018) Here, abbreviated and lightly edited, are selected highlights from Mr Schmidt’s analysis of the global economy:  While China’s surprising resilience deserved most of the credit early in 2017, the strong showing in recent months has been due largely to a rebound in capital goods expenditures. Energy and metals-related investment, in particular, has provided an important boost, not only to emerging market exporters but also to Germany, the USA, and other major developed markets.  It is particularly encouraging that growth in Europe has become more self-sustaining and less vulnerable to imbalances. With unemployment down and incomes growing, European consumers are beginning to unleash several years of pent-up demand, putting the Continent squarely in the early stages of a cyclical recovery. European consumers have been somewhat vulnerable to higher oil prices, but the energy environment remains benign compared with earlier in the decade.  In Japan, Abenomics continues to show signs of progress. As Japan’s unemployment rate has declined to a 23-year low, labour shortages have emerged: the ratio of jobs to applicants has climbed to its highest level since 1974. While broad-based wage increases remain modest, workers are moving to higher-paid positions, especially in the part-time segments of the economy. In assessing the prospects for continuing global expansion, Mr Schmidt turned his attention to China, whose growth rate is expected to slow in 2018. But he said he was optimistic that its leaders can keep the economy expanding at a pace that does not threaten growth for China’s trading partners.  China’s leadership, now exceptionally concentrated under President Xi Jinping, has shifted its focus from top-line growth to boosting the quality of life for Chinese citizens, chiefly by reducing pollution. Even as they pursue this new “China Dream” plan, wrote Mr Schmidt, “Chinese officials are likely to step in with accommodation as needed in order to meet their other

BigStockPhoto.com Photographer: Aispl

Automotive

Electric vehicles, with their far fewer moving parts, bode much lower service-shop income for car dealers “Electric cars... are poised to throw a monkey wrench into the gears of that finely tuned business model.” The business model referred to by editor John Voelcker of Green Car Reports asserts that new-car sales, while less profitable for franchised dealerships than servicing, create a steady flow of customers who will come in for service in the future. The principle has worked well for USA car dealerships. In the wake of the 2008-2010 recession, the average car on American roads today is more than ten years old. These durable vehicles – especially those still in warranty – provide a reliable stream of service revenue. But Mr Voelcker warned that dealerships face a future in which the reduced repair-and-replace requirements of electric vehicles (EVs) will generate far less service revenue. Taken together, battery-electric and plug-in hybrids currently account for only about one per cent of new-vehicle sales. But that percentage is bound to increase as EVs gain in acceptance. (“Dealers Start to Worry About Ebbing Repair Income from Electric Cars,” 2 nd February) A recent article in the industry trade journal Automotive News , excerpted by Mr Voelcker, states it starkly: “Experts say everything in the back of the store – vehicle repair, parts, body shops, service customer retention – will be disrupted if the coming armada of electric vehicles, which require less maintenance than traditional cars and trucks, sells in high volume.” Wally Burchfield, Nissan North America’s vice president of US aftersales, offered Green Car Reports his estimate that a battery-electric vehicle would generate only two-thirds to three-quarters the service revenue from regular maintenance items that a gasoline car would.  Suggesting that this might be even “a bit optimistic,” Mr Voelcker noted that tyres and wiper blades are the sole wear items on a Nissan Leaf EV (although replacement of the filter in the cabin air-intake system is recommended). While late-life EVs could need suspension work, alignment and brakes, reports of Nissan Leafs and Toyota Priuses still on their original brake pads at 75,000 miles are not uncommon. He further cited a UBS teardown of a Chevy Bolt EV and a gasoline-engine Volkswagen Golf. The analysis concluded that the cost of replacement parts for the Bolt (with 24 moving parts) would be 60 per cent lower than that for the Golf (with its 124 moving parts).

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Wire & Cable ASIA – May/June 2018