Emerging Markets Weekly

It may be decades before incomes in emerging markets approach developed market levels, yet it seems clear that the sheer size of these populations means that consumer markets are already very powerful forces in many emerging markets.

It is astounding to learn that there were only 6.5 million mobile phone subscribers in India in 2002. The market simply exploded over the past decade as incomes rose and credit became widely available. Currently India boasts more than 500 million cellular subscribers according to the Telecom Regulatory Authority of India.

In China, retail sales rose nearly 17% in 2009 in real terms, up from roughly 15% in 2008. China now boasts an auto market that surpassed the United States in volume making it the biggest market in the world.

Of course we are at a very early stage of development of these markets given the fact that per capita incomes in the emerging markets are a fraction of incomes in developed markets. That is why, China’s auto market is projected to grow to double the size of the U.S. market in just ten years according to Goldman Sachs and India’s cellular market will likely double in only five years time according to the Telecom Regulatory Authority of India.

Gross national income per capita for Brazil, Russia, India and China was $5910, $7560, $950, $2360, respectively in 2007 according to the World Bank; low by our standards. As incomes grow over the next two decades, these consumer markets will eclipse markets in the developed world.

Companies have recognized this trend and many are thankful for their emerging market exposure over the past year given the weak state of consumer markets in the United States, Europe and Japan. For example, GM saw sales growth of 66% in China in 2009 to 1.8 million units versus roughly 1.9 million units in the U.S. in the first months of 2009. This is a trend that is playing out in Emerging Markets with new first time consumers!