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Global car output to break 100 million units by 2021

Traffic jam, Beijing, China
Stuart Dee | Stockbyte | Getty Images

The global automotive industry is set for an explosive expansion over the next seven years, research from IHS Automotive, part of IHS Global Insight, showed, with China accounting for half of the growth.

Global vehicle production will increase by 21 million units to 106 million units per year by 2021 as the industry continues to recover from the impact of the global economic recession.

"Segments are changing globally as the emerging markets tip the balance and mature markets come under pressure to downsize," said Mark Fulthorpe, director of global vehicle production forecasting at IHS Automotive.

Global car makers have bet on booming demand from the rising middle classes across emerging markets in hopes it will offset the impact of declines in Europe. But slowing economic growth in the major BRIC economies - Brazil, Russia, India and China - has sparked concern that the industry could be left with excess supply.

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IHS said the world's number two economy will still account for half of the production of the additional 21 million units over the next seven years, while North America and Europe will also be key drivers, the report said.

Meanwhile Japanese and South Korean production is marked to decline as original equipment manufacturers (OEMs) focus their efforts abroad.

I HS' Fulthorpe added that overcapacity in China and emerging Asia was a concern.

"If we turn the focus to China and emerging Asia we are bombarded by announcements that capacity will be increased particularly by the global OEMs looking to further establish themselves in those kinds of markets," he said.

"Will it be a long-term threat on a plant by plant basis? Well it would be if the markets weren't materializing to the rate that's being expected," he added.

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European recovery

Although Europe was pinpointed as a growth area, IHS added that the region was likely to get off to a slow start as declining demand in Russia and Turkey will limit production growth to 1 percent in 2014.

But the story will shift next year, they said, with European output seen increases by 4 percent per year between 2015 and 2017. The resurgence would be led by the recovery of domestic demand and sustainable increase in exports, primarily to the U.S. and China.

Improvements in the Spanish and Italian economies, following enormous losses experienced during years of recession, are set to contribute towards half of Western Europe's production growth by 2021.

However, Western Europe's contribution to Europe's overall production is set to fall to 50 percent by 2021 from 70 percent currently, the research revealed.

"European car makers will meet divergent demand environments, depending on which part of Europe they are more exposed to," said Denis Schemoul, manager of Europe vehicle production forecasting, IHS Automotive.

This week Netherlands-headquartered Fiat Chrysler said it would increase net profit fivefold to around 5 billion euros ($6.97 billion) by 2018. It said growth would be boosted by a major increase in sales of its Jeep SUVs and by revamping its Alfa Romeo brand. Investors were not convinced of the firm's five-year plan, however, and shares tumbled 12 percent on Wednesday.

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IHS' reference to 'units' includes both passenger cars and light commercial vehicles.