IHS Global Insight Perspective | |
Significance | German passenger car exports rose by 44% year-on-year in the first half of 2010, according to the latest data published by the VDA industry body, while they were up 26% from May. |
Implications | This is extremely welcome news for the German automakers. China is fuelling export growth, while a general recovery in the global premium automotive market is also boosting overseas sales. |
Outlook | Although the headline figure for German-based manufacturers' exports appears impressive for the first half of the year, the increase is tempered by the large anticipated decline in the German domestic market as a result of the termination of the successful scrappage scheme. |
German passenger car exports rose by an impressive 44% year-on-year (y/y) in the first half of 2010 to 2.16 million units, according to the latest data published by the German industry association, the VDA. The accelerated increase was aided by the low base level recorded in the first half of 2009 and a sustained recovery in the global premium passenger car market spearheaded by extremely strong growth in China. The export trend also accelerated in June, with volumes rising 26% month-on-month (m/m) during the month to 395,000 units. Overall German passenger car production rose by 10% in June to 524,700 units. Combined first-half production was up by an even more marked 23% y/y at 2.85 million units.
VDA president Matthias Wissmann commented that the association expects exports to slow in the second half of the year, but he added, "…we are confident of boosting car exports for the whole of 2010 by at least a fifth and so being able to increase production at home by at least 10 percent." He added that exports will become increasingly important as a result of the weakness being exhibited in the German market following the withdrawal of the scrappage scheme. Wissman added that, "There is no question that foreign business is the motor of this industry." He also cautioned that this year's export growth "must be seen against the background of the very weak months last year". Preliminary data suggest that passenger car sales in Germany for the first half of this year declined by 29% y/y, making exports even more important to the German industry in 2010.
Some traditional market territories for the German original equipment manufacturers (OEMs), such as the United States, managed to recover during the first half. Light-vehicle sales in the U.S. market rose by 17% y/y in the first five months of the year to 4.6 million units.
Western Europe is an important regional market for German OEMs, but the recovery has been slower here as the ending of scrappage schemes has had a significant downward effect. Nevertheless the overall market rose by 3% y/y during the first five months, although sales declined 9% y/y in May, highlighting a potential worrying downward trend for the market as the second half of the year will suffer from the relatively high base of comparison instigated by the success of scrappage schemes, especially in Germany, during the second half of 2009. China was the real growth engine of the global automotive industry in the first half of 2010 and this was especially the case for the German OEMs, with the premium brands such as BMW, Audi, and Mercedes-Benz enjoying accelerated growth during the first half of the year. Audi has announced that it delivered over 100,000 units in China for the first time in the first half of 2010, with the company's sales rising by 64% y/y to 109,887 units. Mercedes-Benz saw its sales in China between January and May rise by 107% y/y to 46,800 units, while BMW also experienced a strong rise in volume.
Outlook and Implications
Export growth for the German OEMs is likely to moderate somewhat in the second half of the year as the base for comparison with the second half of 2009 will be higher as the export market environment began to improve at that point. China will be the biggest source of export growth for the German OEMs in 2010, although the German carmakers continue to invest heavily in increasing Chinese production in order to avoid the country's import tariffs. Mercedes-Benz and BMW have significant passenger car manufacturing joint ventures (JVs) in the country through Beijing Automotive and Brilliance, respectively, while Audi already has a significant Chinese manufacturing presence.
IHS Automotive forecasts that combined German automotive production will rise for the full year 2010 by 4.7% y/y to 5.39 million units, up from the 2009 level of 5.11 million units. This may seem a moderate increase given the massive rise in exports during the first half of the year, but this is also indicative of the large anticipated fall in the German light-vehicle market in 2010: IHS Automotive forecasts passenger car sales of 2.85 million units, down from 3.8 million units in 2009. The market received a massive boost in 2009 as a result of the extremely successful German scrappage scheme and the German OEMs will suffer as a result of the resultant pull-forward effect on sales in the domestic market this year.