USA and China increase – Western Europe recovers slowly – politicians should boost competitiveness in Germany and Europe
It is my pleasure to welcome you very warmly to the VDA’s annual press conference.
The automotive year 2014 has seen considerable uncertainties and geopolitical conflicts, especially the crises in Ukraine, Russia and the Middle East. To add to this, the motor driving the economy is struggling in some important European countries. And in Germany, too, the forecasts for the GDP in 2014 have been significantly revised downwards by many institutes in recent months.
However, we should not think of the automotive year 2014 as playing in a minor key. The situation is actually better than the current mood.
Here are the facts:
- In 2014 Western Europe expanded again – for the first time after four years of shrinkage – by a good 4 per cent to over 12 million passenger cars. The new EU Member States in fact show double-digit growth (+12 per cent).
- China continues to increase – we expect a rise of 10 per cent to just over 17.9 million passenger cars.
- The US market will reach the 16 million mark in 2014 (+4 per cent), thus equalling the level before the crisis.
The Russian light vehicle market is of course weak at present, and Brazil has also gone into reverse.
Yet this does not change the overall picture very much: the global passenger car market has also increased in the year 2014, because the three major regions – Western Europe, the USA and China – are growing. This more than compensates for falling figures on other markets. This year we expect the world passenger car market to expand by 2 per cent to 74.7 million new cars.
Naturally the development of the Western European market is immensely important to our companies. Our share of this market amounts to 50 per cent. The growth in Western Europe as a whole masks the fact that the EU countries are progressing at different speeds:
The countries that have got to grips with their quite painful reforms are now moving rapidly out of the crisis. For example, this year’s new registrations of passenger cars have climbed by 18 per cent in Spain, by nearly 35 per cent in Portugal, and by around 30 per cent in Ireland.
On the other hand, we are still concerned by developments on the markets in Italy and France. Italy will indeed expand by 3 per cent this year, but the volume remains far below its pre-crisis level. The picture is similar in France; where the market growth for 2014 will come to a mere 1 per cent. The market lacks dynamism and consumer confidence.
By contrast, the passenger car market in the United Kingdom has developed very well, expanding this year to almost 2.5 million new cars, which matches the pre-crisis figure. The year-on-year rise works out at 8 per cent. The British are obviously more optimistic than their neighbours in other large Western European countries – they have been steaming ahead since 2012.
German passenger car market just exceeds the 3 million mark
I shall now turn to the German domestic market. In November 250,100 passenger cars were newly registered here (-2 per cent). So far this year, the market volume has increased by 3 per cent to 2.8 million units.
The German passenger car market will exceed the 3 million mark by a small margin in 2014. Compared to the previous year this represents a slight rise of around 2 per cent. The fact that domestic incoming orders had risen 5 per cent by the end of November has given us confidence.
Passenger car production at the German sites will expand by 2 per cent in 2014 to exceed 5.5 million new vehicles. Production abroad will finish the year up by 6 per cent at nearly 9.2 million cars. Total global car production by German group brands will rise by 4 per cent to 14.7 million units.
Exports for the entire year will reach a volume of just over 4.3 million units (+3 per cent). Incoming orders from other countries up to and including November showed a year-on-year rise of 7 per cent. At 784,200 employees, the total workforce in Germany has increased by 23,400 as compared to 2013. In the first nine months of the current year, the German auto industry’s turnover rose by a little over 6 per cent, to 284.6 billion euro. In fact the figures are rising in all three manufacturer groups – passenger car and commercial vehicle manufacturers, suppliers, and makers of trailers, bodies and buses.
To summarise: 2014 is definitely a successful year for the German automotive industry – exports, production, turnover and employment are all rising. However, staying with musical metaphors, we can say that the growth tempo on the Western European market is more of an “adagio”; we are still a long way from an “andante” or an “allegro” – let alone a “fortissimo”.
What will 2015 bring?
According to our current forecasts for 2015, the world passenger car market will expand by another 2 per cent in 2015 to total 76.4 million units. However, the high revs we have seen to date on important markets will ease off somewhat. In China we expect a rise of 6 per cent to 19 million new cars. The US market will increase by 2 per cent to a good 16.4 million light vehicles. In absolute figures this means that taken together, these two markets will expand by 1.4 million units in 2015; their growth for this year already comes to 2.2 million vehicles.
Western Europe is also moving forward, although less dynamically. We expect to see an increase of 2 per cent to around 12.2 million units. The reasons for this are that the UK has returned to where it was before the crisis and therefore has little room for further expansion. We expect only slight rises in Italy and France. And we expect the German market to make only a lateral shift, that is, modest growth of 1 per cent to just over 3 million new registrations.
In 2015 domestic passenger car production will increase by 2 per cent to 5.65 million units, while production by German group brands abroad will climb by 5 per cent to 9.6 million new cars. So in all, the German automotive industry will build 15.25 million passenger cars around the world (+4 per cent). We expect exports to show slender growth in 2015 (+2 per cent) to 4.4 million units. Employment in Germany will remain stable.
The challenges of electric mobility, competitiveness and TTIP – politicians need to take action
The market statistics alone do not allow a full assessment of the situation. The automotive industry is facing huge challenges in the fields of technology, competition and trade policy. And in these areas in particular we need to see action from politicians – both in Berlin and in Brussels.
I would like to pick out three points:
- the market ramp-up for electric mobility,
- enhancement of Europe’s competitiveness,
- and the planned free trade agreement between the EU and the United States (TTIP).
Electric mobility ramp-up needs flanking measures
Since January, Germany has reached a market volume in five figures for the first time ever. Up to the end of October new registrations of electric cars (purely battery-driven, range extenders, and plug-in hybrids) had risen by 68 per cent to almost 10,400 units.
The German carmakers lead in this area of technology, too. There is no other country with a wider range of electric automobiles. As McKinsey’s current Electric Vehicle Index (EVI) indicates, over the last four years Germany has made the greatest progress in its portfolio of electric cars. By the end of this year, German OEMs will have 17 series models with electric drive on the market. Another twelve will be added in 2015. We have reached our goal of being the “leading provider”.
Yet we are still a long way from the second goal, of establishing Germany as the “leading market” for electric mobility – despite our high growth rates. At home we have virtually all the necessary technologies along the entire value-added chain. Now this potential has to be utilised.
Here action is required from politicians most of all. Time is running out. The electric mobility law should be passed next spring. It includes the use of bus lanes and privileged parking spaces. That is the first step, and further measures must follow rapidly. If the market ramp-up is to occur by 2017 as planned, the incentives will have to be arranged so that they have an effect in the next three years. It is important to create clarity here quickly.
Today the National Platform for Electric Mobility (NPE) submitted its latest progress report to Chancellor Merkel. In it the NPE’s principal recommendation is introducing a special depreciation rule for companies that procure electric cars. Up to 50 per cent of the costs should be tax-deductible in the first year. We welcome this proposal explicitly. It should make the purchase of electric vehicles economically attractive to fleet managers, too. The disadvantage for company car users has already been balanced out. The politicians should swiftly take up the proposal and implement it.
Furthermore, a procurement initiative can provide important stimulation on this market. Public companies and the government, the federal states, and the municipalities should set a good example when renewing their fleets. It is also necessary to expand the publicly accessible charging infrastructure. It is true that most motorists will charge up their vehicles at home or at their workplace. Yet the success of electric mobility depends crucially on charging being a simple process that is possible during trips, at any time. So far there are not enough charging points. We need a standardised, easily accessible charging infrastructure that is independent of the providers.
The research and development projects for electric mobility should be continued as before. The institutes need a reliable framework for planning. That will be possible only with a sustainable and secure basis for their funding.
Our manufacturers and suppliers have invested heavily in battery systems – for example thermal management, battery control and cycle stability – and come up with enormous innovations in recent years, which have put them in the lead in this field.
The NPE report also favours pushing forward the R&D activities for long-term battery cell production in Germany. The aim of making Germany the leading provider in electric mobility refers to the entire value-added chain.
This brings me to my second point: the policy-makers must focus their work more on the competitiveness of business and industry – both in Germany and in Europe.
The high level of employment in Germany must not obscure the fact that as an industrial location our country has lost part of its advantage over recent years. In an international comparison the energy costs here are high – and we note with concern that they are rising again. Unit labour costs are also climbing once again. Recently passed social-policy measures, such as the minimum wage and retirement pensions at 63, impose extra burdens on Germany as a production location. This is also the critical conclusion of the German Council of Economic Experts in their expert report. First of all the efficiency of the economic processes must be guaranteed, and then distribution can be changed via the taxation and transfer system – and not the other way round. For this reason it is now urgently necessary to have a new political framework – with priority clearly placed on growth and employment.
Our manufacturer group with the most members illustrates the challenge facing Germany as an industrial location: since the crisis, the suppliers have worked their way into a stronger international position. They are characterised by their drive for innovation and their competitiveness. At the same time, they are up against tougher international challenges. Now also medium-sized companies have to find ways of following the large OEMs or their major suppliers onto foreign markets and producing there. This dual task – high capacity utilisation and development at home, in parallel with increasing production at foreign sites – is anything but easy to manage. Politicians must take the right decisions to create competitive conditions in Germany which will contribute to securing the suppliers’ sites here at home during the coming decade. This offers huge opportunities – Germany must exploit them.
The industry also expects to see these political priorities at the new European Commission in Brussels. There, too, promoting the competitiveness of industry has to become the yardstick for political decisions. Anyone who has watched closely the trends in industrial proportion of gross value-added over recent years will not be able to sit back and relax.
And of course, the individual EU states must also do their homework. Those, like France, that wish to have access to European investment money, must also initiate reforms at home. On this point we totally agree with European Commissioner Oettinger. Lasting growth and employment do not result from a higher proportion of public business – but solely through the success of firms with high levels of exports, particularly among SMEs.
A look at China and the USA reveals that world-wide competition among locations is becoming harsher all the time. Those who only think Eurocentrically will miss the boat. For this reason too, every future CO2 regulation in Brussels has to be more closely geared to a balance between ecology and economy. New regulations must not strangle innovation. On the contrary, they must stimulate it.
Determined progress on the Transatlantic Trade and Investment Partnership (TTIP)
I would like to finish off by saying a little about the planned Transatlantic Trade and Investment Partnership (TTIP) between the EU and the USA. From our point of view, the TTIP is of strategic significance. The point here is not only to remove import duties that represent an annual burden of 1 billion euro on the automotive industry alone. In fact, this is an opportunity to set standards today in a transatlantic free trade agreement, which can later also apply around the world. Experts have calculated that the existing duplicate regulations and bureaucratic barriers between the EU and the USA are equal to an import duty of 26 per cent. Eliminating these non-tariff trade barriers would therefore be a genuine economic stimulation programme.
The EU and the USA should therefore move the TTIP negotiations along swiftly. An agreement of this type would be a strong and important signal for Europe as a business location – and in addition it would be of geostrategic importance for the operability of the two most important continents in our Western value system.
In view of the importance of the Asian economic area, the European Commission should redouble its efforts to negotiate free trade agreements with the most important ASEAN countries, e.g. Malaysia and Thailand, and bring the talks with India to a successful conclusion.
May I summarise briefly. The automotive year 2015 offers more opportunities for growth, even if the recovery in Western Europe is slow. We expect the German automotive industry to increase production and exports, and maintain stable employment.
The risks are generally of a political nature. Alongside the geopolitical uncertainties, the determination of politicians in Berlin and Brussels will be the prime factor deciding whether Germany and Europe can become more competitive – and whether ramping up electric mobility gets the necessary boost. A free trade agreement between the EU and the USA would mobilise considerable growth drivers. This opportunity should be used.
|November 2014||January - November 2014|
|Passenger Cars *)||Units||Change
14/13 in %
14/13 in %
|German makes incl. group makes||184.000||-2||2.025.700||3|