Statement delivered by Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), at the VDA’s annual press conference in Berlin on Friday, December 2, 2016
It is my pleasure to welcome you most warmly to our annual press conference.
Even if the year 2016 has not been an easy one – in many ways – looking at the markets I can say now that this is a good automotive year. The demand for new vehicles is rising worldwide.
Over the year as a whole, the Western European passenger car market will have expanded by 5 percent to 13.9 million units.
The US market (light vehicles) will close at 17.1 million new vehicles, which represents a slight fall (-2 percent), albeit at a very high level.
The Chinese passenger car market is surprisingly buoyant. We have therefore again revised our forecast for China upward and now expect a volume of 23.1 million units – a rise of 15 percent compared with last year.
In October alone, the Chinese market grew by 22 percent. However, one reason for this rapid growth is that according to the information available so far, the reduced rate of VAT on vehicles with small engines in effect since October 2015 is to be increased again at the end of the year. So this is a kind of anticipatory effect. It remains to be seen whether this tax incentive will be extended.
In all, the global passenger car market increased by 4 percent in 2016 to around 81.6 million units, thus exceeding the 80 million mark for the first time.
The domestic market is also showing a welcome trend: the German passenger car market added 5 percent in 2016, growing to almost 3.4 million new registrations. That is the best result so far in this decade. The market has been boosted by the ongoing healthy state of the economy, which is reflected in high employment, a good level of consumer income, and favorable financing conditions. We assume the market volume will be similarly large next year.
Employment in Germany rose by 13,800 to 814,600 in September (latest figures). That is the best September result since 1991. In the previous month, August 2016, the highest value for the last 25 years was recorded: 815,400 employees.
Total sales by the German automotive industry increased by 2 percent during the first nine months of the current year to reach nearly 306 billion euros.
Despite the difficult conditions, this year’s domestic production will climb to around 5.8 million units (+1 percent). We also expect a high figure for 2017.
Passenger car exports were stable in 2016, at 4.4 million units. We expect a volume of 4.3 million passenger cars in the coming year (-2 percent).
Foreign production by German group brands shows a rise of 6 percent for 2016 and has topped the 10 million mark for the first time; in 2017 it will probably increase by 3 percent.
The global passenger car market will continue its growth in 2017 – Western Europe and the US will remain stable
What do we expect from the coming year?
The general upward trend will continue, although the risks will also increase. The growth curve will flatten out somewhat.
In Western Europe we expect stable development with a volume close to 13.9 million units.
The US market will show a lateral shift in 2017, so we again expect a volume of 17.1 million light vehicles.
The Chinese passenger car market will continue to expand in the coming year, but the growth will be slower. We predict a rise of 5 percent to 24.2 million passenger cars.
In total, in 2017 the world’s passenger car market will add 2 percent to 83.6 million units.
One reason for this is that we assume that the two major causes for concern – Brazil and Russia – will start to pull out of their recessions. Russia is expected to return to the growth zone next year and add 5 percent, reaching 1.5 million new cars (after losing 10 percent in 2016 to just over 1.4 million passenger cars). In 2017 Brazil, which has recorded a fall of one fifth in the current year, will hover around the existing low level.
These forecasts already take into account the initial effects of the Brexit vote. In 2017 we expect an 8 percent fall in new registrations of passenger cars in the UK, to just over 2.4 million cars. It is difficult to estimate further developments at this time but clearly in the medium and long term a “hard Brexit” could have adverse consequences both for Western Europe and for Britain itself.
We are also concerned by the question of the free trade agreements. I hope that the US will continue to see the advantages of good trade relations with Europe. At present the EU levies an import duty of 10 percent on passenger cars exported from the US to Europe, and this could be eliminated by TTIP.
European commercial vehicle market increases in 2016 – shrinkage in the US
A brief look at the international markets for commercial vehicles (over 6 t):
This year we are satisfied only with developments in Europe. The Western European market for heavy commercial vehicles will show an increase of 8 percent for 2016, to 279,000 units, while sales in the new EU Member States grow by 12 percent to 63,000 vehicles.
However, the US market is shrinking (-13 percent), while Russia (-7 percent) and Brazil
(-25 percent) are still very weak.
By contrast, the results are good from China (+17 percent) and India (+12 percent), and this year the global market for heavy commercial vehicles shows a 4 percent rise to a good 2.8 million vehicles.
In the coming year we expect the Western European commercial vehicle market (over 6 t) to make a lateral shift (-1 percent to 277,000 units).
Our offensive for the mobility of tomorrow
However acceptable the automotive year 2016 is, we are not resting on our laurels by any means. We face enormous challenges – in the fields of powertrains and digitization. Some people are speaking of disruptive changes.
The Italian poet and philosopher Dante is quoted as saying, “One person waits for the times to change, the other seizes the day and acts.”
This basic conviction runs right through the German automotive industry.
- By 2020, the German automotive manufacturers will more than treble their portfolio of electric cars – from the current 30 models to nearly 100. In 2019 electric drive (PHEVs and BEVs) will be present in practically all series.
- The German automotive industry will invest over 40 billion euros in alternative powertrains in the period up to 2020.
- And it is making a stand on the charging infrastructure. BMW, Daimler, and Volkswagen’s Audi and Porsche are planning a joint venture with the Ford Motor Company for an ultrafast high-power charging network on Europe’s freeways. The first stage will comprise 400 charging sites. This initiative indicates how seriously the German manufacturers take electric mobility, and that they wish to tackle this joint project as a group of manufacturers, similar to the purchase of Nokia Here.
- We will continue to develop and optimize the conventional powertrains – gasoline and diesel. This can reduce consumption by up to 10 to 15 percent in the coming years.
- We are finishing off the last “areas for improvement” in respect of exhaust emissions. As of 2017, more and more passenger cars with a direct injection gasoline engine will be fitted with a particulate filter. This means that the problem of particulates from gasoline-powered vehicles will be eliminated.
- Diesel engines: We are pushing for the introduction of SCR, the most advanced exhaust technology. At the end of 2019, 80 percent of newly registered diesel passenger cars will already have SCR, and at the beginning of the next decade almost every newly registered diesel passenger car will have it. This resolves the issue of nitrogen oxides from new vehicles. For many years now diesels have no longer had a problem with particulates because particulate filters are fitted as standard.
- We are building on petroleum-independent “e-fuels” that can ensure CO2-neutral mobility even when used in internal combustion engines, because they tie up exactly as much CO2 during their production as they release during combustion.
- Over the next three to four years we are investing 16 to 18 billion euros in digitization – which is the second major innovation trend, alongside electric mobility.
- The German automotive industry is already the world champion in patents for connected and automated driving. It holds 58 percent of all the patents issued in this field anywhere in the world since 2010. We wish to extend our position as leader.
- We are developing innovative concepts for urban mobility in order to make it more environmentally friendly, safer, more reliable and more efficient. To this end, the German automotive industry is working in cooperation with selected towns and cities. Furthermore, the German OEMs are expanding their car-sharing schemes both in Germany and at international level.
I would like to give you brief details about some individual aspects:
Public discussion centers on the question of an automobile’s propulsion system. Today 98 percent of all passenger cars on German roads have an internal combustion engine. This is also true of new registrations. This year so far, the share of electric vehicles has been less than 1 percent.
Yet the picture will change considerably in the coming years.
Not so very long ago, experts were assuming that in 2025 roughly 3 percent of newly registered passenger cars would have electric drive.
Today we are convinced that the development will proceed much faster and we expect that in 2025 around 15 to 25 percent of new registrations will be of electric cars. So one in four or one in five new cars will then have electric propulsion (BEVs or PHEVs). The number of vehicles produced by German manufacturers alone is predicted to go well into the millions.
The number of models is rising, and electric mobility will reach the mass market as of the next decade.
Electric mobility – increasing range, falling battery costs
The range will increase greatly, so that 500 kilometers on one charge will be normal. In addition, we assume that the battery costs will continue to fall and we expect this to stimulate the demand for e-cars in the future.
The 40 billion euros that the German automotive industry is investing in alternative powertrains includes not only research and development investments, but also expenditure on production and tools.
This is a great effort by the German automotive industry, because these huge investments have to be financed from current business. Moreover, both consumption and emissions by gasoline and diesel systems will continue to be improved.
We cannot simply terminate one type of drive train, the way some people outside the industry think we can. This industry is not a business startup that can keep on tapping into new funding despite continual losses. It bears responsibility for many hundreds of thousands of employees. The crucial factor will be how the markets worldwide develop. One thing is certain: customers are not going to dance to the tune of a planned economy.
I am sure that electric mobility offers enormous opportunities to this industry and to Germany as an automotive location. For example Ola Källenius, a member of Daimler’s Board of Management, reckons that the switch to electric cars in the next few years will actually create more jobs because in parallel to electric mobility, the classical powertrains must also continue being developed.
By 2020, the total global car market will expand by a good 11 percent to 91 million new vehicles. A large proportion of this growth will be cars with internal combustion engines, even if the share of electric vehicles rises steadily.
Our objective is to be successful with both lines of development.
There is no reason to be despondent. Instead we, the German automotive industry, want to address these challenges proactively. However, we are also fully aware that the requirements for employees will change. That is why qualifications and training are so important.
The point is to find the right balance in the development of technologies, the right timing and challenging objectives. And policymakers in Berlin and Brussels must create a suitable regulatory framework.
German manufacturers with a high market share in electric mobility
The German automotive industry is right on the ball when it comes to electric mobility. This is illustrated by a look at the markets:
Our share of the market in electric passenger cars is 57 percent in Germany, and 48 percent in Western Europe. In Norway – where three out of ten newly registered cars already have electric drive – we have pushed our market share up to 57 percent. On the US market one fifth of all new electric cars sold bears a German badge. Even in Japan we have a double-digit market share (12 percent).
Of course ramping up electric mobility will need the corresponding infrastructure. The German Government has decided to invest 300 million euros in the charging infrastructure by 2020, which is the right action. We estimate that this will take us from the current 6,800 public charging points to around 15,000, and in the case of rapid charging stations from 150 to several thousand. The joint venture just announced between German automotive manufacturers and the US group Ford for installing 400 ultra-fast charging stations in Europe represents a strong signal.
Fast charging is important especially along the freeways, where drivers only want to stop for a short time. Rapid charging points can deliver 80 percent of the battery’s charge within a short time. In urban areas, on the other hand, there are many places where normal charging is sufficient – anywhere where the car is stationary for a longer period, such as in parking lots, the garage at home, and at work.
Politicians should create the regulatory conditions – and not prescribe technologies
Precisely because electric mobility is coming, it would be completely mistaken to discuss today a certain date from which new passenger cars with combustion engines can no longer be registered. Anyone who makes that sort of demand is totally blocking out the political, economic, social and above all the climate-policy consequences of such an approach. It has quite simply not been thought through.
I am convinced that politicians should create a smart and of course a stringent regulatory framework, but should not prescribe technologies, and certainly not prohibit certain types of powertrains. It is not bureaucrats that drive technical progress, but the many thousands of engineers and developers at our manufacturers and suppliers.
Diesels are necessary for achieving the climate protection targets
A word about diesels: there is no doubt that the illegal manipulations at one of our member companies have taken their toll in trust, and the sector’s image has suffered considerable damage. Some people have brought this upon themselves. This industry is rightly expected to master technological challenges – and without loopholes or gray areas.
However, from the very beginning we have refused to cast general suspicion on all modern diesels. They are actually necessary for reaching the climate protection targets. A major German daily newspaper recently commented on the debate over banning diesels in order to improve the air quality in towns and cities with these words: “Banning diesel vehicles from the roads would be to sabotage the climate protection plan.” Correct, because a diesel vehicle consumes up to 25 percent less fuel than a gasoline-powered vehicle, while its CO2 output is 15 percent lower. That makes diesel vehicles an indispensible component in realizing the European climate protection targets. And with the latest exhaust technology (SCR) the subject of nitrogen oxides from diesels is also resolved.
Climate protection is a global task – the automotive industry plays its part
Climate protection is a global task, and naturally the German automotive industry is also involved. It is, however, appropriate to point out that with a target of 95 grams by 2021, the EU has the strictest CO2 target value for new cars. In the US the target for 2021 is 119 grams, in China it is 117 grams, and even Japan’s target of 105 grams is much higher than that in the EU.
To avoid misunderstandings: we are facing up to this task; we, too, are for climate protection. But we should also recognize that we cannot tackle this global challenge by either Germany or Europe going it alone. Germany accounts for only 2 percent of total global CO2 emissions from fuel combustion, and the EU accounts for 10 percent.
There is also another reason why it would be wrong to want to prescribe a certain propulsion system: an electric car whose battery is charged up using electricity generated from coal has a worse impact on the climate than a modern diesel.
In addition, we definitely see great opportunities in synthetic fuels (“e-fuels”). They are changing the situation. These petroleum-independent e-fuels could secure CO2-neutral mobility because they tie up exactly as much CO2 during their production as they release later during combustion.
Most of the technology needed for e-fuels is still at the development stage, and the costs are still high. Yet when this approach is ready for series production, internal combustion engines could in fact enjoy a “second spring.” This example shows how very open the innovation process is to new developments. We would therefore do well to keep all options for drive trains and fuels open.
Digitization improves road safety
This brings me to the second major trend of the future, connected and automated driving. The cars of the future will be not only electric, but also connected and automated. The entire automotive industry is undergoing a “process of digital transformation,” with investments running into the tens of billions. Here, too, we have the clear goal of staying in the “driver’s seat.”
It looks as though the conditions are right for this, and we are world champions in patents for this area. The top ten in the international patent ranking for “autonomous driving” include six German firms: Audi, BMW, Daimler, Volkswagen and the two suppliers Bosch and Continental.
The benefits of digitization are obvious: connecting vehicles with one another can make a huge improvement in the accident statistics. At present 90 percent of accidents are caused by human error or incorrect assessments of the situation. So safety is the main argument for digitization. Then there are also the aspects of comfort and efficiency. For example, connected driving in Germany could eliminate 20 percent of traffic queues.
Digitization and connectivity bring new business models in their wake. Data is being traded as the new oil, but as yet no one really knows how it is to be collected. Pumps are obsolete, and now many players are drilling in the same hole – all wanting to make a profit.
The automotive industry will continue to pay equal attention to vehicle safety and data protection when data is generated in the vehicle. Furthermore the manufacturers, provided they have consent from the customer, will make vehicle data available to third parties in a competition-neutral manner, so that certain services can be provided.
Data is to be accessed via a secure, reliable and non-discriminatory interface. The European manufacturers and suppliers have now agreed on a concept for doing precisely that.
One thing is clear: it must always be the vehicle-user’s decision whether to pass on which of his data, and which services he wishes to use. In many cases the driver can enjoy considerable benefits if he approves the use of his vehicle data for certain purposes. For example, the problem of manipulating the milometer would be largely eliminated if, by accessing data, mileage readings could be generated from the vehicle and collected in a database that a potential buyer of a used vehicle can access with the consent of the existing owner. It would then be impossible to manipulate such data, and the “life story” of the used vehicle would be transparent. The German automotive industry is open to this type of solution.
Germany and Europe need an industrial timetable
I would just like to summarize.
The passenger car markets have demonstrated welcome development in 2016, and employment in the German auto industry is at a very high level.
Yet we will not win the future by pointing to our past successes, but only through courageous decisions.
For this reason, the German automotive industry is pursuing its offensive in key areas of innovation: in powertrains and digitization. Our companies are evolving more and more into all-round mobility service providers. This path forward will throw up some obstacles, so it certainly won’t be a walk in the park. We are aware of that. And we are willing to work to overcome the difficulties.
What is true of the industry also applies to politics: simply doing “business as usual” is not going to take us forward.
Germany and Europe need – alongside a climate protection plan – above all an “industrial timetable” to safeguard and expand competitiveness on a global scale.
We urgently have to balance climate protection and industrial policy. Germany is an industrial country, and many people envy us for it. If we want to maintain this position, climate policy must not remain the sole political objective. We need a sensible balance between climate policy and industrial policy, a policy of moderation which has regard for employment.
Another point is also very important: the prosperity of this country is based on its export strength. Three out of four cars that we build here in Germany are destined for other countries. This means that no other country is as dependent on free markets as we are. Therefore everything possible has to be done to counteract the budding protectionism that we see in many countries.
The automotive industry is facing major changes driven by electric mobility and digitization. In such times of “automotive disruption” the industry needs policy-makers with smart and constructive ideas at its side. A policy of prohibition or an ideologically motivated “shift in transportation” do not feature. Courage and a sense of reality are required in equal measure, so that we can continue securing and expanding Germany as an automotive location over the next ten years.
|November 2016||January - November 2016|
|Passenger cars *)||Volume||Change
16/15 in %
16/15 in %
|German makes incl. group makes||196,800||1||2,201,600||3|