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EDITORIAL
Iron Man of autoindustry exports
AID Newsletter Editorial 1317 from Peter Schmidt - September 20th 2013
Published: Fri, 20th September 2013 12:49:08 GMT



Munich BMW 3-Series production line

Open quote signDespite continuously sagging new car demand at home and in much of Europe, Germany’s can-do autoindustry exporters have kept the ball rolling, and in so doing are greatly admired and feared, but mainly envied by many of their less fortunate peers 

With few notable exceptions, much of Germany’s autoindustry still appears to be in fine mettle. And that’s in spite of the double bind of its depressed domestic market and the lingering car sales famine in much of Europe, where this year’s car sales are still heading for the worst turnout in almost two decades. 

Nevertheless, few of Germany’s autoindustry leaders could be seen crying into their glasses during the press days of last week’s Frankfurt Show. 

Echoing to an extent rival autoindustries in Japan and South Korea, Germany’s leading carmakers remain largely insulated from the melodrama in their West European backyard. 

That’s because of still thriving exports to the rapidly recovering US market, ongoing growth in China, and particularly the UK. 

Well, it's time for a reality check. While Germany’s car sales to August this year already trail last year’s levels by 6.6 per cent, eight months sales in Britain have already topped year ago levels by some 10.4 per cent, following a 10.9 per cent jump this August. 

Astonishing perhaps, but Britain remains the all-out biggest car export market for German carmakers. 

So much so in fact, that in an average year Britain soaks up more German-made cars than either the US or China. 

So given the realisation that UK car sales have now risen for 18 months running, couldn’t fail but make its mark on Germany’s car production. 

The same goes for the Light-Vehicle market in the US, where eight months sales are up 9.5 per cent, following an even more bullish 16.8 per cent jump this August. 

China’s half-year car market, including built-up imports, was up more than 16 per cent, tempting the industry to revise upwards lower earlier growth projections for this year.

The common thread linking the UK, the US and China is that all of these car markets are comparative bastions for Germany’s carmakers, so their state of health is directly reflected in the underlying well-being of Germany’s autoindustry. 

Add to that today’s favourable euro-dollar exchange rate and what you’ve got is a markedly less dire business climate for Germany’s leading carmakers.

The poor state of car markets in the rest of Europe, including Germany itself, plus the ill-effects of a slowing Russian market, couldn’t fail but make their mark on German plant utilisation. 

However, the ongoing positive developments in the UK, the US and China are echoed in latest German autoindustry numbers. 

By any measure, for Germany’s carmakers things appear on the mend. 

While cumulative domestic car production to August this year still trails year earlier levels by some 2 per cent, production during August itself topped year ago levels by some 9 per cent. 

Likewise, car exports to August still remain 2 per cent adrift, but encouragingly for Germany’s carmakers, rose 3 per cent this August. 

In effect, 74 per cent of the cars built at domestic German plants so far this year were exported, with the bulk of these heading for the still blooming British market, the US and China. 

Given the widely shared view that none of these markets are expected to witness any notable slowing in demand during the remaining months of this year, or for that matter next year, partly explains last week’s no-expense spared extravaganza at Frankfurt’s Motor Show. 

It is no surprise then that the industry’s outwardly relaxed bigwigs could be seen sipping champagne rather than beer, congratulating themselves on having weathered their sharpest crisis in decades without suffering the feared collapse in both sales and profits.

Perhaps most telling of their current state of health and the expected business conditions for the remaining months of this year - Volkswagen Group, despite an 11.6 per cent drop in first half operating profits to €5.78bn, still appears outwardly confident with its full year prediction to equal last year’s €11.5bn, itself an all-time record for the group. 

So despite today’s dire state of Europe’s wider automotive market, thanks to its enviable export strength, most, if not all instrument needles on Germany’s autoindustry dashboard, still appear to point in the right direction.
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