Forecast: US market will grow again in 2010 – clean diesels go on the offensive
Wissmann: German brands increase shares of US market
Statement by Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), at the VDA press conference in Detroit on Monday, 11 January, 2010:
"2009 was probably the most difficult year for the US market for many decades. The worldwide financial and economic crisis triggered the collapse of sales of light vehicles – that is, cars and light trucks – by more than a fifth (down by 21.2 per cent) to 10.4 million vehicles. The fall in the car segment (of 19.9 per cent) was only slightly less than that in light trucks (22.5 per cent). A two-year comparison makes the size of the slump even clearer. Compared to the sales volume in the year 2007, (16.1 million light vehicles), in 2009 around 5.7 million fewer vehicles were sold – a drop of more than a third. For the automotive companies – manufacturers and suppliers alike – this means a painful process of adaptation requiring a lot of courage and costing a huge amount of effort. However, the vitality of this industry is revealed by the fact that it was able to regard such distorting factors as a challenge. And the numerous premieres that are being presented here in Detroit underscore this.
In the last two crisis years we, the German automotive industry, have also not made the mistake of underestimating the significance of the US market. On the contrary, our companies are stepping up their commitment on this market, which remains the largest automotive market in the world, because the long-term growth indicators are positive: population growth in the USA is about 1.0 per cent per year, while the figure in Germany is hovering around zero. And the average age of the US population is 37, which is much younger than that in Germany (44). One year ago, here in Detroit, I stressed our conviction that in the long term the US market will once again return to a path of growth, and I still maintain this position today.
Today we can see the first signs of a revival on the market. In December sales of light vehicles rose by 15.2 per cent, with sales of cars actually increasing by 21.2 per cent. The increase in the demand for light trucks has almost reached double digits (up by 9.7 per cent). With these rates of change, however, one should remember that owing to the financial crisis December of the previous year was very weak. Yet the message is clear: the financial crisis has given the US market a severe beating, but prospects still look good in the medium and long term. The USA remains an automotive country. In the future people will continue to want individual mobility. They need their cars and do not want to go without them. But they are paying more and more attention to fuel consumption. And in this area in particular, the German manufacturers offer tailor-made models that are more fuel-efficient than anything their competitors have to offer. We also come top in safety, comfort, vehicle dynamics and the production of premium cars.
It is especially welcome that for five years now our companies have been continually increasing their share of the light vehicles market, from 5.1 per cent in 2005 to 7.3 right now. Last year alone they added another 0.6 percentage points, selling 763,000 vehicles on the US market. It is remarkable that our market shares have expanded both in cars and in light trucks.
This means that even in the crisis year of 2009 the German OEMs have turned in better results than their competitors.
In light trucks we have not only pushed up our market share by 0.8 percentage points to 3.4 per cent, but we sold 166,345 units on the US market, which in absolute figures is more vehicles (up by 1.6 per cent) than in the previous year, while sales by the "Detroit Three” slumped by more than a quarter, and the Asian producers also suffered a fall of 17.5 per cent.
The explanation for this is that in light trucks, the German manufacturers have a large number of new models in precisely that segment that has doubled its proportion of total registrations over the last six years to almost 22 per cent: the Cross Utility Vehicles (CUV). Here the Germans score with their fuel-efficient models such as the Audi Q5, the BMW X3, the Mercedes-Benz GLK and the VW Tiguan.
The success story of the Cross Utilities is obviously the reason why in the year just ended the light trucks – which some European observers often regard as the "pick-up” segment – also turned out to be relatively robust and was able to maintain its share of all light vehicle sales at 47.5 per cent (in 2008 the figure was 48.4 per cent).
In the car segment, 2009 saw nearly all the manufacturers facing falling demand. In this extremely weak market, the German carmakers produced comparatively good results and increased their market share to the new record level of 10.9 per cent. They sold 596,656 passenger cars, which means that car sales of German brands were admittedly 17.8 per cent below the previous year’s level, but the passenger car market as a whole shrank by around one fifth. The fall at the US manufacturers was more than one quarter (27.1 per cent). And our Japanese competitors suffered a greater drop in sales (of 19.7 per cent) than we did.
In the "luxury car” segment – according to Ward’s classification, which does not really match the classification used in Germany but includes models such as the BMW 1, 3 and 5-Series, the Audi A3, A4, A6 and the C and E-Classes from Mercedes-Benz – the German brands have once again, in the difficult year 2009, expanded their dominant position and increased their market share by more than two percentage points to 45.5 per cent. As a result, almost half of all luxury segment cars that were sold in the USA in 2009 bore a German badge. At a level of 356,497 units, six out of ten passenger cars sold by German OEMs in the USA were in this segment. This accounts for 47 per cent of the total sales of light vehicles by the German producers. And we have also pushed up our market share in the medium segment.
The German brands are in a good position in the small car segment, which over the last four years has increased its share of the overall light vehicle market by almost five percentage points, to around one fifth. The Germans’ market share of this segment rose slightly last year to 9.7 per cent. In total the German producers sold nearly 200,000 small cars (197,945 units) in the USA. So one in four of the German light vehicles sold in the USA in 2009 was in the small car segment.
The balance is positive: in 2009 the German manufacturers gained market shares in all segments where they have models on offer – in the car segment from small cars to medium-sized vehicles and all the way to luxury cars, and among light trucks in CUVs and SUVs.
German manufacturers’ clean diesel strategy for the US market
I would particularly like to say a few words about the desire of all our companies to arouse more interest of US consumers in the clean diesel. It is clear to all of us that in the USA there is a lot of potential for increasing public awareness of this clean, efficient and simultaneously powerful powertrain technology. The German manufacturers are enhancing their range of clean diesel vehicles on the North American market. Therefore, together with our companies, we have compiled the convincing arguments for the clean diesel in a new brochure that we have brought here for you hot off the press. We also wish to spread this publication widely throughout the American market.
I can summarize its most important statements for you right now. First of all, though, I wish to clarify one thing: we Germans are not concentrating solely on the clean diesel. We are not neglecting either the hybrid or any other powertrains. For this reason the brochure opens with our "broad-based strategy,” which can be described with the terms "save,” "add” and "replace.” Under "save” we have the further optimization of the classical powertrains, under "add” we have the combination with alternative fuels, and under "replace” we have the whole range of alternative powertrains – from the mild hybrid to the plug-in hybrid and the "fully electric” vehicle. For a country like the USA, with its huge distances, the clean diesel offers advantages that no other powertrain can: low consumption coupled with a long range. Compared to modern gasoline engines, diesels are around 25 percent more fuel-efficient. There are clear signs on the US market that the advantages of the clean diesel are already winning over the customers.
In diesel vehicles the German producers are continuing to improve their position. In 2008 they already had such a dominant position on the diesel passenger car market that their share came to a whole 100 per cent. This "hundred per cent market coverage” continued in 2009. However, more important is the fact that last year US sales of German clean diesel cars trebled to about 42,000 units (in 2008 the figure was 13,900). The range of diesel passenger cars from German companies has also trebled within one year and now, as in the luxury segment, they are also taking more and more of the compact and medium segment. This "model offensive” will continue to exert its influence in the current year.
That the German brands are leading in clean diesel technology, and have the most environmentally friendly vehicles, is also underscored by the fact that in 2009 and 2010 the renowned "Green Car of the Year” award, which is presented every year at the Los Angeles Motor Show, went to German clean diesel cars: the VW Jetta TDI Clean Diesel, which quadrupled its sales last year, and the Audi A3 TDI Clean Diesel, which has just been launched. And the "World Green Car” award, presented annually at the New York International Motor Show, has also been scooped by German diesel cars in recent years. In 2008 the prize went to the BMW 118d, and in the previous year it was awarded to the Mercedes-Benz E 320 Bluetec.
And in diesel light trucks, too, German brands are moving into the passing lane and offering more and more models that are going down well on the market. Their proportion of the total diesel light truck market has more than doubled within one year and it now comes to 7.3 per cent (in 2008 it was 3.1 per cent). The contributors to this rise include the Audi Q7 and the BMW X5, for example, both of which became available with clean diesel engines in the USA for the first time in 2009 and enjoyed brisk demand. And the VW Touareg and the Mercedes-Benz GL, ML and R-Classes are also available as clean diesels.
On the light-vehicle diesel market as a whole, the German manufacturers have thus more than trebled their market share within just one year, to 25 per cent (in 2008 they took 7 per cent). The German "clean diesel quartet” – consisting of Audi, BMW, Mercedes-Benz and Volkswagen – has models on the market that meet the strictest exhaust standards (Bin 5) in all 50 federal states of the US. And even if diesels did not increase their overall market share (of 2 per cent) as compared to gasoline-powered vehicles in the US in 2009 – due to the weak general state of the market – all the experts still assume that in the medium and long term there are considerable growth opportunities for clean diesels on the US market also. One thing is certain: the German manufacturers will have a disproportionately large share in this growth.
We have brought our latest clean diesel brochure along for you, hot off the press, in which you will find further information about this CO2-friendly powertrain that will help the USA fulfill its demanding climate protection goals.
However, the German vehicle-makers are not putting all their eggs in one basket, but instead are pursuing their "broad-based strategy” on the US market – just like they are doing in Europe. In addition to the clean diesel here in the USA this involves most significantly new models with hybrid drive, that is, gasoline vehicles with electric motors. We have set ourselves the target of establishing the hybrid not only in the light truck segment, but also in premium segment cars. You will see their premieres here at the Detroit Motor Show, and I do not want to say any more about them before the event. Furthermore, we are pushing ahead with the development of electric cars.
Last year the German manufacturers increased the share of light vehicles they built at North American production sites (i.e. within NAFTA) and sold in the USA by 2 percentage points to 28 per cent of their US sales. 547,000 units, or 72 per cent, originated in European plants. So step by step, the German automotive industry is freeing itself from the effects of currency fluctuations. At the same time, this development emphasizes the huge importance of North America both in the global production network and as an export hub.
In 2009 German OEMs produced 535,000 light vehicles in NAFTA – owing to the collapse of the market, production had to be reduced by 31 per cent compared to the high figure from the previous year – but in the future there will once again be an upward trend. We expect that the share of production in the US will continue to rise, above all due to the planned start of production in the VW plant in Chattanooga, Tennessee. To add to this there is the latest decision by the Daimler group to build the next generation of the C-Class at its factory in Tuscaloosa, Alabama, from 2014 onwards, where the R, ML and GL-Classes are also assembled. And BMW is continuing to expand its plant in Spartanburg, South Carolina, so that all the BMW X models – with the exception of the X1 – (i.e. X3, X5 and X6) will be built there. In total, in the past year 11 per cent of all foreign production by German manufacturers occurred within the NAFTA region.
The German manufacturers employ around 24,000 people at their plants in the USA. This means that one in six of those who work for automotive producers in the USA are employed by German companies. Within the NAFTA countries – that is, including Canada and Mexico – 42,200 people are employed by German manufacturers. The number of employees at German supply companies in the USA is about 50,000 – which represents one in eight employees at all suppliers in the United States.
Last year the states of the US took 11 per cent of all exported German passenger cars, which accounted for 13 per cent of the value exported. So, despite the crisis, the USA still remains our third largest export market – behind the United Kingdom and Italy – and in terms of value it comes in second place (behind the UK).
Ladies and Gentlemen,
We expect that in the year 2010 the US market will expand by around 10 per cent to 11.4 million light vehicles. We have purposely kept our forecast on the conservative side, and even the consensus forecast is somewhat more optimistic, at 11.5 million units. A lot depends on whether consumer confidence, which improved slightly in December, continues to stabilize. The real estate market seems to have bottomed out now, and the amount of housing construction is increasing again for the first time in five years – even if it is presently at a low level. These are the first, encouraging signs. The German automotive industry has set itself the target of pushing up its market share here in North America for the sixth year in succession. And we have another goal as well: in the medium term we want to take a 10 per cent share of the US light vehicles market. Today the conditions for doing so – in the "first year after the crisis” – are to be regarded as much more positive than they were only twelve months ago.
Ladies and Gentlemen,
In my view, Detroit 2010 offers a real opportunity for the German manufacturers to establish themselves on the US market – much more than in previous years – also in the high-growth volume segments, and to consistently continue expanding their leading position in the premium segment.”