The US is not alone in experiencing a downturn in automotive manufacturing since the recession. Indeed Europe’s position is remarkably similar with sales down, but following re-structuring and cost cutting the major manufacturers have adjusted to the new normal relatively well. As in the US car and truck manufacturing is such an important sector of the manufacturing market that those countries with disproportionately large automotive sectors feel the effects of a slow down particularly acutely.
As this graph shows, Germany remains the largest auto manufacturing country with 1.4 million units and although production is up slightly, month over month JD Power says domestic sales declined by 31.8% in April compared to last year due to the removal of car scrappage schemes. Mark Leggett in Just-auto.com remained relatively upbeat saying the market should hit bottom around the summer and we will see a gradual recovery thereafter to around 13m units in 2011. The automobile industry trade association ACEA in its report this month described a patchy recovery with some countries coming back faster than others, as this graph shows.
Recovery has no doubt been skewed by scrappage schemes in different markets, some of which finished earlier in the year and some such as Spain that are only just being phased out now. This graph illustrates the impact month over month of the schemes, boosting sales prior to their close as buyers rush to take advantage of offers coming to an end.
Surprisingly sales have not continued last years’ trend toward smaller vehicles. Small cars (segments A and B) accounted for 44.6% of the total market for new cars this year compared to 45.3% in the same period of 2009. Half of all new cars registered had a diesel engine, compared to 46.3% over January May last year suggesting buyers were favoring economy by a switch to diesel rather than a reduction in car size.
ACEA broadly agrees with JD Power in that the association is forecasting a flat year in 2011 with sales similar to 2010. Where they differ is that ACEA predicts 2010 sales of 12.5 m whereas JD Power is a little more optimistic at 13 m. Both are a long way down on the near 15m in 2007. But car makers are fairing better than vans and trucks. Despite a 51% increase three months into 2010, production of vans remained 35% below the pre-crisis level of 2008. Truck production decreased by 5% until April of this year, and by 63% compared to the first quarter of 2008. Sales of buses declined by 22% three months into the year compared to the same period in 2009 and with state budgets being slashed across Europe, state supported services will be slow to replace fleets anytime soon.
Although European car makers have avoided bankruptcy or the equivalent of Chapter 11, there has been much painful curtailment and rationalization of production to match supply to demand. This year and next car producers will probably be content with a stable market in the hope some pent up demand will build for a better middle to the decade ahead.