Ladies and Gentlemen,
it is my pleasure to welcome you most cordially to our half-year press conference. I will talk about the state of the automotive business, give an outlook for the 65th IAA Cars, and explain our position concerning CO2 regulation in Europe.
First, the good news: the global passenger car market will grow again in 2013. We expect a rise of 2 per cent to 70.5 million units. Yet the challenge remains: behind this welcome general development the trends on important markets are drifting further and further apart. In 2013 the USA will expand by 5 per cent to 15.2 million light vehicles, and China is actually showing double-digit growth (+10 per cent), climbing to nearly 14.6 million passenger cars. Just these two countries taken together therefore account for 42 per cent of the world’s passenger car market.
Our cause for concern, by contrast, remains the Western European market. For the current year we expect a volume of a little over 11.1 million units (-5 per cent). This represents the fourth year-on-year fall in succession. It means that Western Europe is miles away from the current record level from the year 2007 (14.8 million units). In the years 2000 to 2007, the Western European passenger car market always stayed above the 14-million mark. So we are currently around 3 million units below this level. This difference is equal to the size of the German market.
If we look at the period from 2009 to 2013, it becomes clear just how wide the gap is becoming. Within these four years the US market – based on our forecast – will have expanded by 4.8 million new cars, while China increases by a whole 6.2 million passenger cars. Taken together, that makes a rise of 11 million cars sold. During the same period, the Western European passenger car market will probably contract by 2.6 million units (from 13.7 million to 11.1 million cars). The additional sales in the USA and China will therefore be four times as much as the shrinkage on the Western European market.
What are the reasons for this decrease in Western Europe? There are three main countries – Italy, Spain and France – exhibiting pronounced market weakness. This year the Italian passenger car market has almost halved compared with 2007 (falling from 2.5 million to 1.3 million cars), Spain is 44 per cent down on its 2007 level, and France has lost almost one fifth. In other words: in these three countries alone, 2.5 million fewer cars will be sold in 2013 than in the year 2007 – i.e. only 3.7 million new cars instead of 6.2 million.
Western Europe’s recovery requires time and effort
None of us can welcome this development. The German automotive industry in particular needs a strong Western European passenger car market. Half of all cars newly registered in Western Europe come from a German group brand. We know that the potential demand for new cars in Western Europe is much higher than it is at the moment. Not all the approx. 3 million purchasers of new cars missing from the figures today have simply switched to local trains, for example, or to car clubs. No – when the state debt crisis is over most of these people will buy a new car again. They want to buy a car, but this has to be postponed because of the current economic situation.
However, it would be completely wrong to label the current crisis as a permanent state of affairs or “normal.” Yet we also know that recovery on the Western European passenger car market will take far more time compared with the amazingly rapid growth of the US market in recent years. People in the European countries must regain their confidence; they need to have prospects in the economic development of their states. This will require painful reforms and structural adjustments – and a policy backed with sufficient resolution to drive this process forward consistently.
Up to now there has been no visible turnaround. In the first five months of this year new passenger car registrations in Western Europe totalled 4.95 million units, which was nearly 7 per cent below last year’s figure. In Italy the drop came to 11 per cent, in Spain it was 6 per cent, and in France it was 12 per cent.
The German market cannot disconnect itself from the difficult conditions
Of course, Germany cannot disconnect itself from this state of crisis. In the first half of 2013 new registrations of passenger cars fell by 8 per cent to 1.5 million units. In June domestic sales totalled 282,900 passenger cars, which is a fall of 5 per cent compared with the same month last year. New registrations of German branded cars slipped by only 2 per cent, while imports slumped by 11 per cent.
However, one reason for the rates of change in the first six months is that domestic demand was still fairly robust over the same period last year. In the first half-year of 2012 we saw a slight rise (+1 per cent), and the June figures actually grew by 3 per cent. Only in the second half of 2012 did the fall become marked: passenger car sales slid 7 per cent below the level from the previous year. In terms of statistics, therefore, we are dealing with a base effect. And we assume that the differences in the second half of 2013 will be much smaller relative to the same period last year.
It is hard to find a convincing explanation for the present market situation using the objective data. The underlying data are not comparable with Italy, France or Spain. Germany has a good level of employment, and incomes are acceptable. It is obviously the insecurity owing to the continuing euro crisis that is making customers hesitant about buying new cars. The proportion of private new registrations in the first five months of 2013 came to 38 per cent, i.e. hovered around last year’s figure (cf. January to May 2012: 39 per cent).
Added to this there is current weakness in the company car segment. During the first five months, new registrations in this segment slumped by 9 per cent. Last year this market sector was still quite stable (-1 per cent). Company cars make up 31 per cent of all new passenger car registrations.
The suppliers in particular are currently under a lot of pressure. Many of them have a stronger position than our manufacturers on the European market. Great flexibility and drive for innovation are key features precisely of the small and medium-sized enterprises, which are often family businesses. Yet the present situation poses considerable challenges for them, too.
We have a certain amount of confidence in the light of the Ifo Business Climate Index, which climbed again for commercial business in June. The improvement in the business climate from May to June (+6.6 points) was greater in the automotive industry than in the processing industries as a whole (+1.6 points). The commercial vehicle manufacturers and the makers of trailers and bodies in particular regard the future business trend and the current situation as far more positive. The passenger car producers however still view today’s situation as challenging, and expectations remain subdued.
We expect that over the year 2013 as a whole the domestic passenger car market will amount to between 2.9 and 3.0 million units. We fully expect that the German passenger car market will settle at around the 3-million mark in the coming years. Among private buyers and commercial customers a considerable potential for delayed purchases is currently building up – purchases which will be made over the next few years. The average age of the passenger cars in Germany is now 8.7 years, which is a new record. Just for comparison: in 2007 it was 7.7 years.
Passenger car exports affected by weakness in Western Europe
In June passenger car exports showed a year-on-year increase of 1 per cent to 354,100 units. In the first half-year, by contrast, they fell 3 per cent to close to 2.1 million units. Structural data are available for the first five months of this year and reveal a 5 per cent decrease in passenger car exports to Western Europe. Exports to euro zone countries fell by 12 per cent. Exports to Europe (not including the euro zone) were increased by 2 per cent. The most important export destination remained the United Kingdom, with a rise of 8 per cent.
Passenger car exports to China shrank by 36 per cent in the first five months. On the other hand, local production rose. Exports to the USA soared by 14 per cent, which shows that the United States is still a major factor driving our exports.
For 2013 overall, we expect an export volume of a good 4 million units (-2 per cent). If the trend since the beginning of the year continues, this target is likely to be reached because exports in the second half of 2012 were also far weaker than in the first six months. So here, too, we are dealing with a base effect.
Slight fall in domestic passenger car production
In June domestic passenger car production showed a surprising year-on-year increase of 3 per cent, reaching 476,500 units. During the first half of this year domestic passenger car production dropped by 3 per cent to just over 2.7 million units. The second half-year can be expected to bring stabilisation, since – as in the case of exports – the base effect of the previous year is still apparent and, in addition, we anticipate a gradual consolidation of the sales situation in Europe. Taking a conservative view, for the year as a whole we assume domestic passenger car production will come to at least 5.2 million units (cf. almost 5.4 million units in 2012).
But we need to look further afield as well. Since 2010 more German cars have been built abroad than in Germany. According to current forecasts, global passenger car production by German automotive OEMs will rise by 2 per cent in 2013 to just over 13.9 million units. Car production at sites outside Germany will climb by 6 per cent to 8.7 million units. The proportion of total production made up by foreign assembly will therefore rise to 63 per cent. The trend towards local assembly continues. Local production will increasingly supply the dynamically growing emerging economies and the USA.
Employment is stable
It may still sound like a paradox to some, but precisely this internationalisation has had a positive impact on Germany as an automotive location and its employment levels in particular:
- because we have been part of the strong growth in China and today have a market share exceeding 21 per cent,
- because in the USA we have expanded faster than the market itself during the last seven years and take nearly 12 per cent of the passenger car market,
- because we have also achieved a market share of one fifth in MERCOSUR, Russia and Mexico – and a whole 42 per cent in South Africa,
we have been able to compensate for most of the weakness in Western Europe and in fact to push up employment slightly at home – in contrast to our European competitors.
In April 2013 the German automotive industry had a regular workforce of 750,500 (+2 per cent). Of these, 430,100 were employed in Manufacturer Group I (motor vehicles and engines), 31,400 in Manufacturer Group II (trailers, bodies and buses) and 289,000 in Manufacturer Group III (parts and accessories). This means that the increase in employment observed since January 2011 is continuing. Each month since the beginning of 2011 has brought year-on-year growth.
The German automotive industry is maintaining its course – despite the economic difficulties. For the year 2013 in total we expect to see stable employment levels.
Strengthen German industry
The markets indicate that this industry is facing huge challenges. International competition is getting tougher. In view of this situation, politicians should do everything they can to make German industry strong enough to withstand the future. Unfortunately there is cause for concern. For months now the political debate has been dominated by ideas for redistribution. In a lot of places it has almost been forgotten that our country’s current prosperity is not dictated by some natural law, but has to be worked for over and over again.
Unit labour costs have been increasing again in Germany since 2011. Industry contributes 26 per cent of gross value-added in Germany, which is indeed still high, but it worries us to see that rising energy costs have been a massive locational disadvantage for a long time now, and are exerting more and more adverse effect on investment decisions.
I could only agree with European Commissioner Günther Oettinger, when he recently warned that the high energy costs could endanger prosperity in Europe and lead to “encroaching deindustrialisation.” We cannot ignore the fact that gas prices in the United States are falling – while prices of gas imported into Germany/Europe have gone up by 13 per cent. Energy costs are of crucial importance in every decision regarding a location, and are therefore strategically significant.
Moreover, we observe with concern how more and more attention is being focused on tax increases in the run-up to the German parliamentary election. From the viewpoint of the automotive industry, higher taxes and levies should be firmly rejected. Tax increases hold back growth and damage Germany as an industrial location. They make German companies less competitive. This applies in particular to the revival of the wealth tax and the introduction of a wealth levy.
In the case of the wealth tax, it additionally creates serious constitutional concerns and will be associated with high collection and compliance costs. As a non-earnings tax, it will overburden low-earning enterprises and exacerbate the crisis. Increasing the top rate of income tax would also result in competitive disadvantages for German partnerships, both in comparison with stock corporations and in international comparison. Particularly in view of the weak economic situation, it would be fatal if now – using apparent environment-policy arguments – the tax approach applying genuine operating expenditure, such as deduction of the costs of a car, were to be restricted for companies.
It has taken Germany many years to restore its competitiveness and thus to reduce its unemployment. Major contributing factors here have been the changes in taxation on earnings due to expansion of the assessment basis and reduction of the rates. Everyone in politics would do well to strengthen industry’s capability to innovate and invest, instead of now imposing new burdens on industrial and family-run enterprises, let alone threaten the their capital.
CO2 regulation in Europe needs moderation – more caution, less speed
The topic of CO2 regulation has been right at the top of the VDA’s agenda for several months. This concerns not only climate action, but also fundamental industrial-policy preparations for the future and Europe’s competitiveness. It is about ecology and economy. We do not have the impression that the Commission has applied moderation to this task. Caution must take priority over speed with such an important industrial-policy decision. Therefore the Irish presidency was right not to rush into anything, but to give the Member States of the European Union sufficient time to examine the proposed compromise.
A lot has been written about this over recent days. Please allow me to mention a few facts that have received rather less attention in the reporting so far:
First: today the German automotive manufacturers are already making the greatest CO2 reductions. By the year 2015 our premium manufacturers will have to bring down the CO2 emissions of their fleets by around 25 per cent. The French and Italian makers are only expected to make reductions half as large (13 per cent).
Second: the German automotive industry has always supported the highly ambitious target of reducing the CO2 output of newly registered passenger cars in Europe to an average of 95 grams by 2020. However, a study by the renowned RWTH Aachen University demonstrated that the target value could not be achieved with classical drive trains (petrol and diesel engines) alone. It is necessary to stimulate the required innovations – primarily alternative drive trains – and not to strangulate them by putting rigid obstacles in their way.
This is why super credits are so important, e.g. for electric cars. A multiplication factor of 1.5 – as envisaged by the EU to date – is too low! In China the factor is 5, and in the USA it is at least 2. Intelligent regulation creates innovative impulses and not bureaucratic restrictions. A way now has to be defined for achieving the strictest limit values in the world.
Third: at 95 grams the EU’s fleet target for 2020, which we basically accept, is the world’s most demanding target level. The USA has stipulated 121 grams, China 117 grams, and Japan 105 grams!
Fourth: the shift was not a result of Germany going it alone, but in fact many other EU countries were also in favour (including Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Estonia, the Netherlands and Portugal).
Fifth: before we discuss the question of which CO2 values should apply in the year 2025, first of all the alternative drive trains have to be launched successfully in Europe. That is not going to be an easy job. So it is all the more important that this development is tracked precisely in an “Impact Assessment” and can be adjusted flexibly later on.
I have already said several times that we do not want Europe to be regulated down to a single small, standardised car. We want diversity of the segments. And we see consumer sovereignty, which astonishingly is hardly ever mentioned anywhere in the debate even though it is actually a constituent part of the market economy, as a valuable principle that must not be undermined by hasty regulation in Brussels.
Our companies invest a large proportion of the 20 billion euro that is spent on research and development every year, in more efficient drive trains. The number of passenger car models that emit up to 130 grams of CO2 per kilometre – which corresponds to consuming 5 litres of diesel to travel 100 kilometres – has increased to around 700, i.e. has more than doubled within two years (cf. 321 models in 2011). German group brands already have 400 models with a CO2 value of 120 grams or less. We will reach the 130-gram target primarily by optimising classical drive trains.
But I wish to stress once more that the CO2 targets cannot simply be extended on a linear basis – and certainly not progressively. In contrast to the 130 gram target, achieving the 95 gram target will require a considerable proportion of alternative drive trains on the roads – pure battery-electric vehicles, plug-in hybrids, range extenders, etc. We will launch 16 electric models onto the market by the end of 2014. Yet they are not automatically going to be a success. For this to happen the industry needs flanking measures from politicians, including those in Brussels.
Preparations for the IAA are running at full speed – around 1,000 exhibitors
The preparations for the world’s most important automotive trade fair, the 65th International Motor Show (IAA) Cars in Frankfurt am Main, have been running at full speed for many weeks. Alongside the numerous world premieres, the innovations will focus mainly on electric mobility and connected driving. The Bundestag and Bundesrat, the two chambers of the German Parliament, have voted to extend the exemption from motor vehicle tax and for compensation relating to company car taxation on electric vehicles.
But the IAA will again be showcasing clear progress in optimising classical drive trains – petrol engines and clean diesels. This year more than ever before, we want to show that the IAA is more than a trade fair – it is “the world’s most automobile show,” as expressed by the new slogan for the 65th IAA Cars. It also offers a wide variety of special shows.
The IAA is the most important international meeting point for the automotive world. This is illustrated by the increasing proportion of foreign exhibitors, which is currently at 41 per cent and therefore noticeably higher than at the last IAA Cars (32 per cent in 2011). Over one quarter of them come from Asian countries (cf. 19 per cent at the IAA 2011). We are looking forward to this IAA. We expect around 1,000 exhibitors – once again all the major passenger car manufacturers will be represented – on an exhibition area exceeding 230,000 square meters. So we expect the key trade fair indicators to be similar to those of two years ago – despite the weakness on the Western European market.
I can tell you one thing already: there will be more Chinese suppliers present than ever before. Over 110 firms have already registered – which means that the number of exhibitors from China has multiplied almost ten-fold (cf. 13 in 2011).
The 65th IAA Cars will take place in Frankfurt am Main from 12 to 22 September 2013. It will be preceded by two Press Days (10 and 11 September 2013). The IAA will be opened by the German Chancellor, Angela Merkel, on 12 September.
Please note: online accreditation started yesterday, at: http://www.iaa.de/presse/akkreditierung/akkreditierung/. And you will find a list of the numerous press conferences in your documentation.
Please allow me to summarise:
- The automotive year 2013 is a challenging year of work.
- Manufacturers and suppliers alike are feeling the weakness in Western Europe.
- Production, exports and the domestic market will all contract slightly in 2013.
- However, we have to differentiate: most of the fall came in the first half-year, partly due to the high levels in the previous year.
- We expect to see slight stabilisation in the second half of 2013.
- We are confident that the slump will soon bottom out.
- The mood is picking up slowly (see Ifo Business Climate Index).
- The global passenger car market is still growing.
- We are in a good position around the world and benefit from the dynamic growth in the USA and Asia.
- The German automotive industry is maintaining its course – despite the economic difficulties.
- Automotive employment in Germany remains stable and in fact shows slender growth.
- CO2 regulation in Brussels requires moderation. Caution should take priority over speed. Therefore it is right that no hasty action should be taken now.
- The 65th IAA Cars is well on the way. The preparations are running at top speed. The number of exhibitors will be around 1,000, which is the same as at the IAA in 2011.
- China’s increasing importance will also be noticeable at the IAA. The number of Chinese exhibitors has risen almost ten-fold.
|June 2013||January - June 2013|
|Passenger Cars *)||Units||Change 13/12 in %||Units||Change 13/12 in %|
|German makes incl. group makes||205.100||-2||1.078.600||-6|