Global Automarkets:
Back on Track or just a Flash in the Pan?
Marius Baader, Head of the Department of Statistics, Analyses and Forecasts at the VDA, the German Association of the Automotive Industry, identifies four main areas of risk: the continued instability of the financial markets, concern over Chinese real estate values, the escalating cost of raw materials and the possibility of a currency 'war'.
Looking at the world economic situation, Baader reported that it was broadly back to pre-crisis levels. In Gross Domestic Product (GDP) terms, Asia continues to boom, with China showing 10% growth, whilst the USA is somewhat lagging behind at 2.7%. He forecast that 2011 would see the recovery continue but at a slower rate.
The US housing market broadly declined in August and there is no clear sign of recovery. The weak market has slowed the rate of worker mobility, thereby placing greater pressure on the labour market.
Taking a view of the Euro zone ‘Big Four‘ countries – Germany, France, Italy and Spain – it can be seen that Europe is on the road to recovery but domestic demand is suffering because of consolidation. Germany is leading the way with GDP growth this year of 3.4%, forecast to slow slightly to 1.8% next year.
Baader identified four main areas of risk: the continued instability of the financial markets, concern over Chinese real estate values, the escalating cost of raw materials and the possibility of a currency ‘war’.
A comparison of global car sales in 2008 and 2010 shows a marked structural shift between the traditional, industrialised, triad countries – USA, EU and Japan – and the Rest of the World. In 2008, the triad accounted for 54% of global sales, but this has fallen this year to 48% as emerging markets in Asia and South America have increased their share and Russia has re-emerged from the horrors of 2009.
Through the first ten months of this year, passenger car sales in China have grown by 37% and by 23% in Russia, while light vehicle sales in the US have climbed by only 11%. Passenger car sales in Western Europe, however, have fallen by 5% in the same period.
Baader forecast that the growth of Chinese market sales will slow down in 2011 while remaining very healthy. The US market is on a slower recovery path and the market share of German vehicles there has risen by about 15%. In Western Europe, 2010 passenger car sales are forecast to decline by 7% to a total of 12.65 million units and to increase slightly next year by 2% to 12.88 million.
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On the commercial vehicle side of the industry, the outlook, according to Baader, is quite bright. Through the first nine months of this year, commercial vehicle sales in Western Europe increased by 9% while those in China and Russia grew by 32% and 54% respectively. US medium and heavy sales were up by 11% over the same period. Baader forecasts global sales of vehicles above six tons to rise from 2,800,000 units in 2010 to 3,010,000 units next year; an increase of 8%. Sales in China are only predicted to grow by 1% in 2011 and global sales without China included will demonstrate a 13% increase. It will only be in China, however, that volumes will return to their pre-crisis levels.
Baader then focused more closely on the German passenger car market. In 2009, the number of new car registrations, at 3.81 million units, was higher than at any time since 1999. Measured against original expectations, the increase was in the region of one million cars. More than 95% of the increase was driven by micro, small and compact vehicles. The market share of German marques fell from 70% to 65% and diesel’s share declined by 14% to just over 30%. Baader forecast new car registrations at 2010 year-end to be 2.92 million units, rising to 3.1 million in 2011 providing consumer confidence stays high and that there will be stability in the labour market.
The performance of the German commercial vehicle market up to six tons was stronger than expected this year at a projected 195,000 units – up from 175,371 units in 2009. Baader forecast a sustained recovery next year, but at a slower rate to 206,000 units. The average over the last ten years was 204,000. The performance of the German commercial vehicle market above six tons has been surprisingly strong. Sales started to pick up in May and the year-end figure is expected to be 70,000 units, up from 61,201 units in 2009 and a 14% increase. Next year, according to Baader, sales could reach 80,000 units which will approach the average over the last ten years of 84,000 although still well below the peak years of 2006 – 2008.
Passenger car exports from Germany will see 2010 just surpassing 2008 at a total of 4.15 million units – 21% up on 2009. Next year, exports are expected to return to the record level of 2007 at 4.3 million units. October 2010 saw a highest-ever monthly total of 378,000 cars exported and almost two-thirds of German exports are now to countries outside the Euro zone. The first three quarters of this year saw exports to China and the US grow by 67% and 60% respectively. It has been the premium segments which have driven the increase, as the following table indicates.
Upper middle class: +44%
Upper Class: +82%
SUV: +82%
Sports car: +44%
Great Britain imported more German cars in the first three quarters of this year than any other country and the Volkswagen Golf was the most-exported vehicle.
Country ranking Jan-Sept 2010:
1. GB 502 000 (+20%)
2. U.S. 371 000 (+60%)
3. China 336 000 (+67%)
4. Italy 271 000 (± 0%)
5. France 241 000 (+8%)
6. Spain 161 000 (+25%)
Model Ranking Jan-Sept 2010:
1. VW Golf 294 000 (+26%)
2. Ford Fiesta 221 000 (+28%)
3. BMW 3 Series 187 000 (-3%)
4. Audi A4 182 000 (+22%)
5. VW Passat 167 000 (+37%)
6. Daimler E-class 142 000 (+67%)
7. Audi A6 137,000 (+36%)
8. Ford 131 000 (+30%)
9. Daimler C-Class 121,000 (+21%)
10. BMW 5 Series 114 000 (+26%)
In terms of German domestic car production, this year should see 5.45 million units built, 10% up on 2009. Foreign production in 2010 at 5.7 million units, will be, for the first time, higher than domestic production with China alone building 1.17 million cars in the first three quarters – a 47% increase year-on-year. Baader predicts a 2011 domestic production figure of 5.7 million units.
The last ten years have seen a significant increase in the share of German domestic production held by the premium segment. In 2000, this segment accounted for 39.7% of the total build but this year the share is forecast to rise to 56.5%. The increase is mirrored in overseas production, where the share rises from 7.8% in 2000 to a forecasted 20% this year.
German domestic production of trucks up to six tons is also looking healthy this year. The first ten months showed a 37% increase year-on-year and the full-year forecast is a total of 223,000 units, an increase of 33% over 2009. Baader forecasts a further 5% rise next year to 235,000 units.
In the over six tons segment the picture is even rosier. Baader predicts a year-end production figure of 110,000 units which will represent a 58% increase over 2009. A further 25% rise is predicted for 2011 to 137,000 units. This represents a return to the production levels of 2005 but is still almost a third less than the 2007/08 figures. As is the case in the passenger car segment, the increase is being driven by high exports.
Baader moved on to report on the CO2 emission levels of German manufacturers which have decreased steadily by 13% since 2006 to a current level of 153 grams per kilometer and which keeps Germany on track to achieve the European Union agreed limit of 130gCO2/km by 2015. A further reduction of 10g/km to reach a target of 120g/km can, according to Baader, be achieved by other technological improvements such as better tyres or the use of biofuels.
The agreement also sets lower fines for automakers that exceed the limits originally planned. Between 2012 and 2018, the fines will be graded as follows: five euros for the first gram of CO2 above the limit, 15 euros for the second gram, 25 euros for the third and 95 euros for the fourth. From 2019 the agreement states that for every gram over the limit, the fine will be 95 euros. In the long term, as defined in the compromise agreement, the target will be an average of 95gCO2/ km for new cars by 2020.
Baader pointed out that the future path towards CO2 reduction is a three-step concept. Savings can be made in the areas of engine and drive train development, decreased rolling resistance and aerodynamic drag, lighter construction and the development of hybrids. These savings can be mitigated by the use of bio-fuels, synthetic fuels, compressed natural gas, full hybrids and lithium-ion batteries but increased by the substitution of fuel cell hydrogen combustion and the development of electric vehicles.
He added that fuel cells are still pie in the sky as far as their use in mass production is concerned and that hybrid is still a bridging technology. It has advantages in urban areas, but over long distances diesel is more economical. The development of electric vehicles is being driven by government subsidies worldwide. There is a total energy balance to consider. If electricity is obtained from coal and fossil fuels, there is an environmental advantage. Diesel has much future. German diesel vehicles in Germany average 149.6 grams of CO2 per kilometer, already less CO2 than petrol engines with 150.3 grams!