Dynamic German market – Western Europe’s recovery boosts exports – Maintain Germany’s industrial competitiveness
Statement delivered by Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), at the VDA’s half-year press conference in Berlin on July 2, 2015, at 11.30 h
Ladies and Gentlemen,
I have pleasure in welcoming you most warmly to the VDA’s half-year press conference. On your tables you will find the VDA’s Annual Report, hot off the press.
In the automotive year 2015 the major markets are continuing their growth, but overall the dynamism on the global market is easing off somewhat.
- The US market (light vehicles) will expand by around 2 percent to 16.7 million units.
- In China we expect to see a rise of 6 percent, to nearly 19.5 million new vehicles.
- Western Europe will grow by 4 percent during the year as a whole, reaching almost 12.6 million cars.
But on the other hand, since Mercosur and Russia are again contracting this year – and Japan is also weak – the world passenger car market will increase only slightly in 2015, by nearly 1 percent, to 76.6 million units.
Yet that does not change anything about the long-term trend. The global automobile market will continue to grow – so by 2020 it will total almost 89 million vehicles.
On the year-to-date figures:
- This year’s US light vehicle sales up to June increased by a good 4 percent to almost 8.5 million units. The German manufacturers recorded a rise of 6 percent, thus growing faster than the overall market. In the passenger car segment our market share comes to just over 12 percent, and it is nearly 8 percent of all light vehicles.
- Up to the month of May, China recorded an increase of close to 9 percent, rising to a little over 8 million passenger cars. Our market share is more than one fifth (21.2 percent). We are following current developments on the largest passenger car market very carefully: the competition is becoming tougher. The potential in China is still nowhere near fully exploited: At present there are 61 cars in China for every 1,000 inhabitants – in Germany the figure is 540 cars per 1,000 inhabitants.
- Western Europe expanded by 7 percent this year up to May and totaled 5.6 million new vehicles.
The Western European automotive countries have picked up speed again following years of crisis. The top five countries all expanded during the first five months of this year.
We expect this to remain so over 2015 as a whole:
- There is remarkable growth in Spain (+16 percent).
- Italy also shows welcome expansion of 8 percent.
- The United Kingdom has reached a high level after two dynamic years, and in 2015 it will experience moderate growth of 2 percent.
- This year France will also increase by 2 percent.
Sales in the new EU Member States will rise by 6 percent in 2015 to 950,000 new vehicles.
Owing to the large market share going to German group brands in Europe (50 percent in Western Europe; 51 percent in new EU countries), the continent’s recovery has a positive effect on our companies – including the suppliers.
Passenger car market in Germany increases – rising employment
This brings me to the situation at home. The German passenger car market is staying on course:
In the first half of this year new registrations rose by 5 percent to 1.62 million units.
We expect a volume of 3.1 million new registrations for the year as a whole (+2 percent).
However, replacing more of the fleet would be good for our country. At the beginning of 2015 44.4 million cars were registered in Germany, which was half a million more than one year previously. The cars on Germany’s roads are getting older all the time: On average they are nine years old (last year 8.8). That may speak for our products and their long-lasting quality, but it is not good news for the environment and for safety. One fifth of the entire car fleet – almost 9 million vehicles – date from the last century, and have much worse emission values, higher consumption and are less safe than today’s new vehicles.
The really good news is the employment situation:
The number of automotive jobs in Germany comes to 785,100, which is more than 2 percent, or 18,000, higher than one year ago (as of April 2015/April 2014).
Sales in the first four months of 2015 rose by 10 percent to 132.8 billion euros.
During this period, sales abroad have climbed faster (+12 percent to 86.9 billion euros) than those at home (+6 percent to 45.9 billion euros).
Exports and production will rise slightly over the year – strong June results
Over the year as a whole we expect a slight rise in domestic production (+2 percent to 5.7 million passenger cars) and in exports (+2 percent to 4.4 million new cars).
In the first half-year, exports totaled just over 2.2 million passenger cars, i.e. slightly more than last year (+1 percent). Year-on-year growth in June amounted to 17 percent – one reason being the two additional working days.
Domestic production reached a good 2.9 million units in the first half of this year – a stable result. In June it increased by 12 percent.
Incoming orders from Germany climbed by nearly 7 percent up to the end of June, while orders from abroad rose by almost 6 percent. We expect employment to remain around the current level. Foreign production will grow by 5 percent in 2015 to reach 9.8 million new cars.
Germany must become more competitive
The German automotive industry is hugely innovative – every year we invest around 30 billion euros in research and development – and it is active around the globe.
We must however adjust to the fact that the situation is becoming tougher. The good economic outlook in Germany at this time is driven mostly by private consumption. The oil price – in euros – is 31 percent lower than it was one year ago, which takes pressure off private households and companies. The ECB’s benchmark interest rate has been at a record low (0.05 percent) since the fall of 2014 and this also stimulates private consumption. But that is not a long-term solution.
So it is all the more important to enhance lasting investment activity in Germany and to rapidly undertake measures at home that will make the country more internationally competitive again and prevent it from losing its current lead. The competitiveness of German facilities is neither a natural law nor something that will just work by itself in the future. Instead, we have to work for it every day.
But it is precisely when things are going well that provision has to be made for the future. You fix your roof while the sun is shining – you don’t wait until it starts to rain. And making provisions applies not only to every company, but also in politics.
The following indicators cause us concern:
- The energy costs are rising – and they are twice as high as those in the USA.
- In Germany in particular, the advantages offered by the TTIP hardly get any recognition. The public debate is dominated by critical voices. This carelessly puts the future prospects of the German economy and of our prosperity at risk.
- For years now, the unit labor costs here have been climbing again, and by more than in neighboring countries.
- The flexibility on the labor market is threatening to decrease.
- Retirement at 63 is exacerbating the shortage of skilled workers and hits the SMEs hardest. It also pushes up the social costs.
- Our small and medium-sized family businesses are worried about the effects of the Federal Constitutional Court ruling on inheritance tax.
Those who are still in the mood for a party, expecting to distribute more give-aways from the social-policy cornucopia, are closing their eyes to the fact that such a policy will attack our foundations faster than they thought. This applies to policies in general – and also to collective bargaining policy.
For this reason a new course is required that will not allow additional burdens on industry and will purposely give political priority to everything that increases Germany’s attractiveness as an industrial location.
Germany as an exporting nation needs free trade
We supply three out of four cars that we produce here in Germany to destinations abroad. But that also means that three out of four jobs in the German automotive industry depend on exports. So we depend on accessible markets more than our neighbors do. That is why we need free trade agreements, and that is why we need the TTIP. We must seize and use this geopolitical opportunity.
We must also work determinedly to counteract the trend toward protectionism, which can be observed in many countries such as Argentina, Brazil, India, China, and Russia. Since 2008 the WTO has been recording all the new trade barriers in the G20 countries. The number rose to 1,244, and only just under one quarter of them (282) have been removed again. In the period from May to October 2014 alone, 93 new measures restricting trade were added. In the long term this represents a danger to the global economy. We expect the European Commission to launch a new offensive for free trade – both multilateral and bilateral.
Greece must not be kept in the euro zone “at any price”
These days are crucial for Europe. Greece must not be kept in the euro zone “at any price.” It is much more important to apply a sound strategy for the future to strengthen the euro zone and to realize the idea of sustainability and stability in a convincing way in all Member States. Then the Greek crisis can develop a cleansing effect on the other euro states.
The key factor is that in the EU and in the euro zone, existing treaties and rules should again be seen as valid and be complied with. The principle must be that aid is only provided if it is tied to fundamental reforms that are implemented in a credible manner. Portugal, Spain and Ireland are positive examples of countries where this has happened.
Britain must remain a member of the EU
A much more crucial issue for the future of Europe is the long-term membership of Britain in the European Union. Now the British Government, the European Commission and the German Government must do everything they can to keep the United Kingdom in the European Union. Let us use the opportunity of acting together with the UK to make the EU better. We cannot meet excessive British expectations. But we should actively support initiatives from London for less centralization and more market economy and efficiency in the EU.
Germany in particular has a lot of links with British economic policy: The British want greater worldwide free trade, and they want the TTIP. They come out clearly in favor of market-economy solutions – and they are against every instance of excessive state interventionism. Then there is also the common strategic interest of the net contributors Britain and Germany in not losing the “fiscal equilibrium” in the EU.
Britain is a major partner for our industry, too. The share of the British market taken by the German automotive industry amounts to 53 percent. Since 2001 the UK has been our most important partner for exports of passenger cars. In 2014 around one fifth of our passenger car exports (820,900 new cars) went to the UK. In terms of the value of exported cars, Britain comes a strong second (after the US) with 17.9 billion euros (up by 17 percent). Furthermore, German group brands produce vehicles there. All of this must not be jeopardized by the possibility of Britain leaving the EU.
IAA Cars in Frankfurt with first ever New Mobility World
The world’s most important trade show for mobility, the 66th IAA Cars, will open in Frankfurt am Main in September. Journalists can already obtain accreditation online. Over the coming weeks we will send you details of the highlights. Electric mobility has long been a regular part of the IAA, and the number of models is increasing all the time.
Today I would like to draw attention to another important focus of innovation. Connected and automated driving will be a special feature at this IAA, because these technologies make driving even safer, and the accident figures will fall significantly. And dents from parking will be a thing of the past. Comfort will increase, and one day cars will drive into the car park by themselves.
Connectivity can avoid congestion, which saves fuel and CO2. Connected and automated driving offers huge opportunities most of all for commercial vehicles because they have much higher annual mileages on the freeways and so the advantages can be exploited to much greater effect. Our commercial vehicle manufacturers are leaders in these future technologies.
In the coming three to four years, the German manufacturers and suppliers will invest 16 to 18 billion euros in the research and development of connected and automated driving. In addition, the IAA will have a new, dedicated section for it – the New Mobility World. We want to demonstrate that no branch of industry on its own will be able to resolve the challenges of future mobility. All the relevant players can therefore present themselves in the New Mobility World in relation to the various thematic areas.
Furthermore, previously non-automotive companies such as Google, Deutsche Telekom and Samsung will be there with interactive displays of their contributions to future mobility. We are certain that digitization and connecting society, urban mobility and mobility services will generate completely new possibilities for individual mobility involving cars. The IAA is the right platform for showing this.
I would just like to summarize:
- The first half of 2015 has been successful for the German automotive industry.
- We have continued to consolidate our global presence.
- We are in a good position on all important growth markets.
- Employment and sales have increased.
- In the second half-year we expect growth in exports, and therefore also in domestic passenger car production.
- The three large markets – Western Europe, the US and China – will also continue to expand in 2015.
- International competition will get tougher.
- So we must take all the political measures we can to strengthen Germany once again as an industrial location.
- And we need accessible markets and free trade agreements so that employment and prosperity here in Germany will remain at high levels.
|June 2015||January - June 2015|
|Passenger Cars *)||Units||Change
15/14 in %
15/14 in %
|German makes incl. group makes||228.300||15||1.170.800||6|