Wissmann: German car market grows vigorously

Berlin, 04 July 2016

 

Statement by Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), on the occasion of the VDA half-year press conference on   4 July 2016, 11:30 h, Berlin

Ladies and Gentlemen,

Allow me to welcome you all most warmly to our half-yearly press conference at which I would like to give you a current overview of the world’s automobile markets. First of all, however, I would like to comment on two subjects – the Brexit and the diesel situation.

We need “better regulation” in the EU

Not everyone in Europe could believe that the vote in the United Kingdom went the way it did and the result evidently surprised the British themselves as well. Following the initial disappointment, policy-makers should now address the situation rationally. From the standpoint of the automotive industry there is a clear priority. Everything must be done to permit the hitherto unimpeded movement of goods and services between the United Kingdom and the other EU states in future as well. Free trade brings benefits and advantages for both sides.

However, at the same time it is important to avoid a situation in which other EU Member States may feel encouraged to undertake similar initiatives. The question of EU membership is not a suitable issue for internal political conflicts. On the other hand, the EU should concentrate on those topics that the individual Member States cannot master alone. In this way Brussels too could draw the right conclusions from the vote. This common Europe must become more attractive for its members. We need “better regulation”. And we need an appropriate division of tasks and burdens in the EU, not further “deepening”.

The core idea of the Single Market must be brought back into the spotlight. Each case of regulation requires a sense of proportion and must take the question of Europe’s competitiveness into account. The EU must not turn into a community of constantly growing transfers, or even become a transfer union. Instead it should become a community of law and of legal validity.

The United Kingdom is an important market for us. German corporate brands sold 1.3 million new cars there last year, representing a market share of 50 per cent. And the UK tops the export ranking list. In 2015 our manufacturers exported 810,000 new cars produced in Germany to the United Kingdom – more than to any other country.

Conversely, the British are at least equally strongly reliant on the continent. Of the nearly 1.6 million cars built in the UK in 2015, a good 1.2 million units – in other words three quarters – were exported. The main buyers were the other EU states. Virtually every second car exported (57 per cent) was sold to the European mainland. This means that following the referendum, nobody can have an interest in making international trade in goods between the United Kingdom and the continent more expensive or more difficult by erecting customs barriers. However, those holding political responsibility in the United Kingdom should be aware of one thing. Full access to the Single Market will only be possible on the basis of the four fundamental freedoms.

Diesel – rebuilding confidence

And now on to the diesel issue. The past months have been anything but easy for Germany’s automotive industry. The image of the industry has sustained substantial bruising. And we are partly to blame for this ourselves. It is rightly expected that our industry will master technological challenges. And this without any loopholes and grey areas. The fact that some observers doubt this is understandable. We have all had to experience what uncertainty arises if a regulation is not clear, but instead leaves scope for interpretation which is then used.

Not everything that is legal is also legitimate. The mark was overstepped in some cases here. This has cost trust – among the public, among policymakers, and among customers. To ensure that clarity prevails in future, the legally stipulated type testing conditions have now been specified more precisely. In laboratories and on the road. This is right and necessary. Excessively wide margins have to be closed.

But we don’t just want to call for the legislator. The automotive industry knows that it is chiefly responsible itself for its public image. That is why we want to move forward and work at renewing our credibility.

  • We are in favour of the upcoming WLTP laboratory test.
  • We are in favour of it because it will replace the outmoded NEDC and the new cycle will show more realistic values.
  • We also support the coming RDE (Real Driving Emissions) road test. It will set guideposts for emissions on our roads.
  • The German automotive industry also advocates a reform of the type approval procedure. The manufacturers are offering to make their software concepts for after-treatment of exhaust gases available to the approval authorities.
  • The companies will continue to constantly review and develop their compliance and monitoring processes further.
  • And we as an industry will communicate more actively and enter into dialogue with various groups in society.
  • We shall talk to customers, staff, society and policy-makers about the future of mobility and show what solutions we see for the challenges of tomorrow.

I am firmly convinced that the German automotive industry with its innovative thrust and the latest in modern technology is able to meet demanding limit values and reduce consumption and emissions further. This applies in particular for diesel technology. Thanks to equipping them with modern filters as standard practice, diesel vehicles have not had any particle problems any more for some years now. We are also making progress with nitrous oxide emissions. A modern Euro-6 diesel lowers NOx output compared with its predecessors by about two thirds, both in limit values and on the road, and thus satisfies the most demanding emission limits.

And customers too remain convinced of the advantages of modern diesel vehicles. In the first half of 2016 as many as 812,000 new diesel cars were registered in Germany. That is a new record. Never before have more diesel vehicles been sold in Germany in the first six months of a year.

The more quickly ever more Euro-6 vehicles come on to the road, the greater the progress in air quality will be. A study by the Aachen research institute AVISO in cooperation with the Technical University Graz and the Heidelberg environmental research institute ifeu calculates that with normal market penetration by Euro-6 vehicles, the air quality targets in the cities will be reached in a few years.

Petrol and diesel vehicles are necessary on the way to electric mobility

The German automotive industry is pursuing its “away from oil” strategy with great commitment. We are freeing ourselves step by step from fossil energy sources. In the medium to long term the future lies in alternative drive systems and fuels. However, along the path we need a sound mix of drive systems. This includes the plug-in hybrid, and it also includes petrol and diesel powered vehicles. And of course it is important to look at realistic timeframes. If today there are – politically motivated – calls for the “end of the internal combustion engine” by the year 2030, this is not expedient in terms of climate policy, industrial policy or social policy. It will not be possible, not in any industrialized country in the world.

Even companies that set themselves extremely ambitious electric mobility goals assume that in the year 2030 two thirds of new vehicles will still be driving with internal combustion or hybrid drives. And the industry will have to finance the high investments in alternative drive systems from the sale of these cars with “conventional drives”. If politicians close off this “source, they will be obstructing the path towards the mobility of tomorrow.

Policy-makers were always well advised when they created framework conditions. However, as soon as they believed they were called upon to impose specifications for technology, they reached an impasse – in economic terms as well. Moreover such approaches contain “planned economy” elements that take neither technological progress nor customer needs into account. That is anything but modern or innovative.

Megatrends electric mobility and networked and automated driving

Our companies – manufacturers and the supply industry – are at the centre of a turnaround in mobility that is being driven by the two megatrends of alternative powertrains and connected and automated driving. It is evident that this will also massively alter and reorganize the automobile value chain. The German automotive industry invests over Euro 30 billion worldwide every year in research and development. The lion’s share is channelled into electric mobility and digitization. Our manufacturers already have around 30 series models with electric drives in their programmes today, and many more have been announced for the coming years.

In such a phase of ‘automobile disruption’ this industry needs politicians by its side – with wise ideas and modern environmental and economic policies. These include resolute development of charging infrastructure for alternative drive systems in Germany and Europe.

A forward-looking approach also needs “moderation and proportion” in regulation. As we know, the EU already has the world’s most ambitious CO2 regulation today. It also comprises promotion of innovation potentials in digitization, measures for stock renewal and for conservation of an intact highway infrastructure. Accordingly enough remains to be done to advance mobility sustainably and in an eco-friendly manner in this country. This does not include politicians “banning” a particular drive type.

The second great innovation trend is connected vehicles and automated driving. Enormous progress is being made here. Our manufacturers and suppliers are deeply committed. I am convinced that driving will in future be even safer and more comfortable – with vehicles that in the best case will display “zero emissions”!

Car markets – Western Europe, USA and China remain on growth track

And now to the market. The world automobile market developed well already last year. And figures to date for this year indicate that 2016 will be another growth year.

  • For Western Europe we expect an increase in sales of 5 per cent to 13.8 million cars.
  • The US market will grow by 1 per cent in 2016 to 17.5 million light vehicles.
  • The Chinese car market is expected to grow by 8 per cent to almost 21.7 million units.

In other words, the three major automobile markets that together account for two thirds of the world market are still on growth track. Russia (-5 per cent) and Brazil (-15 per cent) remain weak, and Japan (-2 per cent) is not moving ahead. Altogether the world automobile market is expected to grow by 3 per cent in 2016 and break the 80-million barrier for the first time (80.6 million).

The year to date:

  • Car sales in China grew by 10 per cent to 8.9 million units in the first five months. The main growth engine was the SUV segment.
  • The same can be observed in the USA. Light vehicle sales in the USA up to June increased by a good 1 per cent to 8.6 million units.
  • The development in Western Europe is particularly encouraging. In the first five months of the year new car sales grew by 9 per cent to 6.1 million vehicles. All the major markets showed growth, France, Italy and Spain even reported double-digit growth rates.
  • In the new EU Member States too, demand up to May was also very lively (+17 per cent).

As the market share of German corporate brands in Western Europe and the new EU Member States was around 50 per cent, the recovery is displaying positive effects on German manufacturers and suppliers.

Domestic car market rises to 3.3 million vehicles

The domestic car market is exhibiting a vitality that some did not expect. We raised our forecast for the year to auf 3.3 million new registrations (+3 per cent) already at the beginning of May (previously: +1 per cent to 3.23 million cars). In the first half new car registrations increased 7 per cent to a good 1.73 million units. This is a good starting position for a successful second half.

Domestic car production grew in the first half by 4 per cent to a good 3 million units. For the whole of 2016 we expect a production volume of 5.8 million units (+1 per cent). While exports within the EU are rising – especially to Italy, Spain and the new EU Member States –, exports to China have remained at last year’s level. Exports to the USA declined in the first five months. Exports grew slightly by 2 per cent in the first half to 2.3 million units. For 2016 as a whole we export that exports will remain stable at 4.4 million units.

Production abroad remained stable in the first five months at a good 4.1 million cars. Given the positive development in China and the USA, we expect a slight increase by 3 per cent to 9.7 million cars for the year as a whole.

Higher employment and rising sales

The strong economy, especially on the European markets, enabled the German automotive industry to step up the numbers employed (permanent workforces) again. At present (April 2016) there are altogether 801,100 directly and permanently employed staff. This represents an increase of 15,600 compared with a year ago. Staff increases were reported in all three manufacturing groups. Sales increased by 3 per cent in the first four months to just under Euro 137 billion, of which a good Euro 88 billion were export-dependent sales abroad.

Dynamics of Europe’s commercial vehicle markets promise a good IAA

Naturally we have to take a look at trucks and vans in this IAA Commercial Vehicles year. In the first five months the West European market for heavy duty commercial vehicles (over 6 t) grew by 16 per cent. All the markets in Western Europe expanded. The demand that had accumulated in the crisis years is now being relieved. For 2016 as a whole we are expecting a growth of 8 per cent to 280,000 vehicles – which would be the highest sales volume since 2008. The new EU Member States are contributing strongly here – in the first five months there was a rise of 29 per cent.

The German market for heavy commercial vehicles (over 6 t) set off at high speed in the first half with a rise of 8 per cent and reached a volume of 44,350 units. We have therefore raised our forecast for the year as a whole and expect a market volume of just under 87,000 heavy trucks (+4 per cent).

Developments in the van sector are equally encouraging. In the first six months the domestic market noted a growth of 11 per cent to 129,500 units. Here too we can expect strong growth for the year as a whole.

We can already draw one conclusion today. The momentum in Europe’s commercial vehicle markets augurs well for the world’s leading trade fair for transport, logistics and mobility, the 66th International Automobile Exhibition (IAA) Commercial Vehicles, which will take place in Hanover from 22 to 29 September 2016. Preparations are in full swing – within VDA and in the many companies who will be coming to the IAA as exhibitors. “Driven by ideas” is the IAA slogan. And the key visual indicates that the megatrend of digital transformation, connected vehicles and automated driving will dominate this IAA Commercial Vehicles too. We will be setting a new accent with the “New Mobility World Logistics” concept.

Summary

Let me summarize. We are living in exceptional times. The EU is faced with enormous challenges and policy-makers must act wisely. The diesel and the automotive industry have taken a drop in their image scores – and now we have to win back trust. We have understood this. However, what we are pleased about and a little proud of is the fact that customers still have confidence in the automotive industry, as the sales figures show:

  • The West European car market is growing.
  • The German market is growing as well.
  • The diesel vehicle market remains stable and impresses customers with its technological efficiency.
  • And values are long-lasting: diesel vehicles are just as much in demand on the second-hand market as they are in new vehicle business.

Internal combustion engines will remain with us for years to come. They will flank and finance the rise in electric mobility. And they still have potential – both diesel-powered and petrol-powered models.

And – our industry is in the midst of a disruptive innovation process which the terms “electric mobility“ and “digital transformation” can only hint at. This is connected with massive investments in research and development.

Apart from a few exceptions, a look at the automobile markets gives us every reason for confidence. This year too car sales will be higher across the world, and Western Europe is developing particularly dynamically.

I am convinced that the German automotive industry – manufacturers and suppliers – will master these challenges.

Thank you.

 

Eckehart Rotter
Eckehart Rotter Head of Department Press

Tel: +49 30 897842-120 Fax: +49 30 897842-603
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