U.S Market Will Grow Again in 2010, Says VDA

By Brendan Moore


This popped up while we are here at the Detroit Auto Show – a press conference and a press release from VDA (Verband der Automobilindustrie). Their forecast of U.S. market new vehicle sales in 2010 is 14 million units, and 16 million units in 2012.

They also go on to say that German makes will increase their market share in the next five years, apparently counting on exploiting the expected weakness of the Detroit automakers in the foreseeable future.

The press release is printed in its entirety here:

Forecast: US market will grow again in 2010 – clean diesels go on the offensive

Wissmann: German brands increase shares of US market

Frankfurt am Main/Detroit, 11 January 2009. “Even if the current crisis is cutting deeper and more painfully than anything that we have experienced in recent decades, the following motto still applies to the German manufacturers, especially here and now in the USA: Yes, we can! In the last four years the German manufacturers have continually expanded their share of the market – and will continue to do so in 2009 with their innovative range of products. Despite the crisis the US remains one of the most important automotive markets anywhere in the world, accounting for around one quarter of the total global demand for automobiles,” stressed Matthias Wissmann, President of the German Association of the Automotive Industry (VDA). He was speaking at the VDA’s press conference at the North American International Auto Show (NAIAS) in Detroit.

However, the VDA president said, after the dramatic collapse in sales on the light vehicle market last year (of 18 per cent, down to 13.2 million units), “the hard times are not over” this year. He added that the impacts of the crisis on the real estate and financial markets, coupled with the clear unwillingness on the part of the banks to issue consumer loans, had deeply unsettled North American consumers and left them much more reluctant to buy a new car. Demand will continue to fall at least in the first half of 2009. “For the year 2009 as a whole we expect a further fall to 11 to 12 million light vehicles. If the measures announced or already passed by the US Federal Government have the intended effects, the first positive tendencies could be seen in the last quarter of 2009,” Wissmann stated.

The VDA president stressed, “There is no doubt that in the long term the US market will start growing again.” For example, the renowned Global Insight institute expects that the year 2010 will once again see sales of 14 million light vehicles on the US market. And the market is forecast to exceed 16 million vehicles in 2012. Despite the current difficulties, the VDA President said, the general conditions in the US certainly have potential for a recovery, for instance strong population growth (+0.9 per cent per year) and a much lower average age of the population (37) in comparison to Japan (44) and Germany (43). “In addition, in only a few days from now Barack Obama will be inaugurated as the new President of the United States, and is already actively considering economic policy. We also observe that this country is tackling the financial crisis head-on, with courage and determination. Particularly in view of the huge challenges now present, self-confidence and concrete action are necessary,” Wissmann emphasized.

He also stressed that “In these extremely weak market conditions the German producers sold 890,000 vehicles in 2008 (down by 6 per cent), which was a relatively good result, and they managed to increase their market share by one percentage point to nearly 7 per cent.” This means that fortunately, one trend seen in recent years has not changed: “T he German manufacturers scored with their fuel-efficient models equipped to the highest safety standards, so they recorded better figures despite the overall downturn. In the last four years they have continually expanded their share of the light vehicle market – from 5.1 per cent to 6.7 per cent. The 10 per cent mark is certainly a possibility in the medium term.” Their market share grew both in the car segment and in the light truck segment – and in both a new record market share was achieved in 2008. In fact, among cars the German share reached an impressive 10.7 per cent.

In the premium segment the German brands actually succeeded in improving their already dominant position, to 43 per cent. Among the ever more important small cars in particular, which include the smart, the BMW Mini and the VW Jetta, the German brands pushed up their sales by 11 per cent to 258,000 units, while the segment as a whole was almost stable (down by 1 per cent). This means that nearly one third of German vehicles sold in the USA last year was in the small car segment. Over the last four years this segment has shown continual growth within the car sector, rising from 14 per cent to nearly 20 per cent. And in the Cross Utility Vehicle (CUV) sector, too, whose market share rose in the last four years from 11 to over 18 per cent, the models from German producers – including the VW Tiguan and the BMW X 3 – have impressively increased their sales – by more than 50 per cent. Wissmann said, “These examples underscore the fact that the model policy of the German auto manufacturers is focusing on the right aspects on the US market.”

This positive assessment also applies to the German manufacturers’ assembly plant policy: “For many years now our companies have been continually expanding their production within NAFTA,” Wissmann stated. In 2008 they pushed up their production in this area by 5 per cent, to 776,000 vehicles; this equals 15 per cent of the entire production of German manufacturers outside Germany (cf. 10 per cent in 2005). In the coming years this share will expand markedly once again due to the start of production at VW’s plant in Chattanooga, Tennessee.

With 232,000 light vehicles, at this time one in four German vehicles newly registered in the USA comes from a North American production site (i.e. within NAFTA). A total of 658,000 vehicles originate in Europe, and 524,000 of these in Germany. Over the last four years alone, the German manufacturers have increased their production in NAFTA by 75 per cent to 775,000 units, while the volume of exports to this region during the same period remained more or less stable. “So step by step the German automotive industry is becoming more independent of currency fluctuations, and at the same time this development has emphasized the great importance of North America both in the global production network and as an export hub,” said Wissmann.

He also stressed, “Exports by German carmakers to the USA last year turned in much better results than the US market did as a whole.” The United States receives 13 per cent of all German passenger car exports, yet 16 per cent of their value. “This makes the United States our second-largest export market in terms of volume – coming behind the United Kingdom – and in terms of value it is actually our largest export market,” according to Wissmann. Despite the currently weak US dollar exchange rate, in 2008 the German automotive industry recorded an automotive trade surplus with the USA of 15 billion euro. The German suppliers alone exported goods to a total value of almost 3 bn euro to the USA. The premium quality of German producers on the US market was also underscored by the premieres in Detroit, including the Audi R8 V10, the BMW Z4 and the Mercedes-Benz E-Class.

The German manufacturers are also setting standards especially when it comes to environmentally friendly technology, Wissmann underlined. “For example, from this year onwards there will be a German ‘clean diesel quartet’ on the US market for the first time – comprised of Audi, BMW, Mercedes-Benz and Volkswagen. All four brands are now launching models that meet the strictest exhaust standards (Bin 5) in all 50 federal states of the US. This is sure to stimulate demand.” J. D. Power expects the current market share going to diesel light vehicles to quadruple by the year 2015, rising to 9 per cent. Wissmann: “We are sure that the German brands will lead this growth process. This is also suggested by a clean diesel being selected for the first time as ‘Green Car of the Year 2009’ – the VW Jetta TDI, which fulfills the strictest US exhaust standards. Our German manufacturers will also be demonstrating their expertise in hybrid technology. There is a lot in the pipeline.” Furthermore, it is German manufacturers, such as Mercedes-Benz with its BlueZero Concept, who in Detroit are showing the way forward to environmentally friendly electrical mobility – with a range of over 400 kilometers powered by electricity. “The German manufacturers, as pioneers of technology, will have the best opportunities of increasing their market shares once again this year,” Wissmann stated.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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