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Germany Autos Report Q4 2010
Business Monitor International, Sep 2010, Pages: 62
Business Monitor International's Germany Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's automotive industry.
Despite significant improvement in the global economic outlook, BMI remains concerned that the operating environment is likely to remain far from easy for European carmakers. Already faced with a much anticipated weak recovery in vehicle demand in 2010, European carmakers are now being tested on soaring raw material prices. Steel, which generally accounts for as much as 10-15% of carmakers' manufacturing costs, is set for a steep increase in price, posing a new threat to auto firms this year. BMI prescribes carmakers speed up cooperation for economising on production costs as a short- to mediumterm strategy.
This was illustrated in Daimler’s tie-up with Renault and Nissan Motor where they agreed to cooperate in areas ranging from compact cars to light commercial vehicles and powertrains in a bid to save on production costs and complement one another’s vehicle technology. Although German carmakers have lagged behind their European counterparts in terms of development of alternative fuel vehicles, BMI believes German carmakers are among the best positioned to benefit from the imminent recovery in the global auto market.
Initial sings of this emerged in Q110 when the country recorded a 28% y-o-y increase in export orders and nearly a 32% y-o-y increase in its production in the first quarter, assembling 1.38mn units. The optimism has prompted BMI to upgrade its production forecast to a 5.5% y-o-y growth in auto production, to 5.5mn units, by the end of this year. However, taking into account the overall slow recovery in Europe’s auto demand and the uncertainty created during mass transition to electric vehicles, BMI believes that a full recovery in auto production may not be possible until 2013. Meanwhile, domestic demand has remained fairly in track with BMI’s expected 20% y-o-y drop this year, with passenger car sales reaching 670,500 units in Q110, down 23% y-o-y. However, we expect significant rebound in sales from 2011 when the outlook for both passenger cars and commercial vehicles will begin looking up, in line with a 1.5% y-o-y growth during 2011. This will take vehicle demand up more than 5% y-o-y and continue growing thereafter, to reach near recovery level by 2012. However, the saturated nature of the German market and the relatively high vehicle ownership levels will mean that the market will fail to attain very strong growth rates.
Despite its limited long-term growth potential, Germany heads BMI’s business environment ratings for the auto industry in Europe, thanks to the unparalleled size of its market. However, we stress this position could be challenged if Russia – the one time leader in the ratings – makes a strong rebound thanks to its vehicle scrappage scheme. Germany’s competitive landscape may also undergo changes as foreign carmakers increase their presence in the country to market competitive alternative fuel vehicles.
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