Abstract
The outlook for the biggest automotive industry in Western Europe remains
gloomy as BMI expects the
recession in Germany to take effect. As BMI
examines in its latest Germany Autos Report, the
government kicked-started
2009 with a broad economic package of EUR50bn, out of which EUR1.5bn
has
been earmarked to support the industry.
As a part of a scheme unveiled on
January 13, the government has introduced consumer incentives of
EUR2,500
for trading in an old vehicle for the purchase of a new, more efficient model
– commonly
known as a scrappage scheme – with the intention of
boosting demand. BMI presents an optimistic
sales forecast with sales
ending at 2.9% lower than 2008, revised from our earlier forecast of a
3.6%
year-on-year (y-o-y) fall. This is in sharp contrast to our export
figures. We expect these to fall by
nearly 7.8% y-o-y against our earlier
forecast of a 6.5% y-o-y fall. This change comes on the back of
slowing
economic activities in Eastern Europe, where German vehicles are among the
most popular.
Similarly, BMI expects automakers to operate on reduced
capacities due to falling domestic and foreign
demand. According to German
interest group Verband der Automobilindustrie (VDA), commercial
production
reached 514,300 units in 2008, up by 2% y-o-y, while passenger car production
fell by
nearly 3% y-o-y to 5.5mn units. In 2009, manufacturers such as
Volkswagen AG (VW) are attempting
to limit over-production and maintain
stronger fiscal positions. Therefore we maintain our production
forecast
of a 3.6% y-o-y fall to 5.82mn units, down from 6.04mn in 2008.
The credit
crisis has brought difficult times, particularly for General Motor
(GM)’s German subsidiary
Opel. It is now seeking EUR2.6bn in loan
guarantees and EUR700mn in contributions from the
government and its
labour force, respectively, to plug the liquidity gap. VW’s finance unit
has received
state guarantees of up to EUR2bn (US$3.87bn) for refinancing
loans from Germany’s Financial
Market Stabilization Fund (SoFFin).
Although most manufacturers have similar problems, the
government is
cautious that supporting some carmakers may set a precedent in the industry,
and other
companies will rely on government support for their
survival.
Germany’s second placing in BMI’s Business
Environment Ratings means there is little room for
growth. The presence of
VW (19.9% market share) as a market leader, followed by Mercedes-Benz
(10.6%), BMW AG (9.2%) and Audi AG (8.1%) leaves most foreign firms with
smaller market shares
and few opportunities to improve sales through the
government’s incentive package.
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