Global demand for passenger cars reaches new high
Global new passenger car registrations increased by 4.5% to 73.4 million vehicles in 2014, exceeding the previous year’s record level. The primary growth drivers were the Asia-Pacific region, North America, Western Europe and Central Europe. In contrast, the overall markets for passenger cars in Eastern Europe and South America remained clearly below the prior-year level.
The global passenger car markets turned in a very mixed performance in the reporting period. Whereas demand in major industrialized nations recovered and the markets in the Asia-Pacific region again recorded strong growth, markets in Eastern Europe and South America saw sharp declines in some cases.
The continued development of the major markets of China and Brazil and the expansion of activities in Russia, India and the ASEAN region are still highly important for the automotive industry.
Trade restrictions have been eased in many Asian markets. However, it cannot be ruled out that these countries will fall back on protectionist measures in the event of another global economic slump.
The stabilization of the passenger car markets in Western Europe, which began in the second half of 2013, continued in the reporting period. The number of new registrations increased again for the first time after four years of decline. However, at 12.1 million vehicles (+4.9%), market volumes were still down substantially on the level before the financial and economic crisis (2007: 14.9 million vehicles). Whereas the French market almost stagnated (+0.5%), moderate growth was recorded in Italy (+4.9%) compared with the low prior-year volume. In Spain, the continuation of the government purchase incentive program accelerated the recovery process (+18.3%). Sustained high demand from private customers led to market growth of 9.3% in the United Kingdom.
In Central and Eastern Europe, demand decreased by 6.7% to 3.6 million vehicles. This was mainly attributable to the sharp decline in unit sales in the Russian market, which accounts for around two-thirds of the region’s total sales, due to the political crisis. Even the government scrapping program introduced in Russia on September 1, 2014 with the aim of promoting the purchase of locally produced new vehicles was unable to stop demand slumping by 10.0% to 2.3 million vehicles. In contrast, at 0.9 million passenger cars, EU markets in Central Europe posted significant growth of 14.8%.
In the South African market, passenger car sales declined by 2.5% to 439 thousand vehicles. This was primarily due to weaker economic growth and rising mobility costs.
In fiscal year 2014, demand for passenger cars in Germany grew for the first time since 2011, rising by 2.9% on the weak prior-year level to 3.0 million units due to a positive macroeconomic environment. However, this increase was confined to new passenger car registrations for business customers (+5.8%); demand from private customers was down by 1.9%. Higher exports, particularly to EU countries and East Asia, meant both passenger car exports (+2.5% to 4.3 million vehicles) and domestic passenger car production (+3.0% to 5.6 million vehicles) recorded stronger growth than in the previous year.
In the North American markets, sales of passenger cars and light commercial vehicles (up to 6.35 tonnes) continued to rise in the reporting period. The NAFTA region recorded its highest overall market volumes since 2005, with sales up 6.0% to 19.5 million vehicles. In the USA, the positive macroeconomic environment, favorable financing conditions, attractive sales promotions by manufacturers, backlog effects and low petrol prices led to a 5.9% increase in market volumes to 16.5 million units. Demand was particularly strong for models in the SUV segment.
In Mexico, momentum picked up over the course of the year. Demand increased by 6.8% to 1.1 million units, reaching its highest level of the past eight years.
The Canadian automotive market achieved a new sales record in fiscal year 2014, with unit sales up by 6.2% to 1.9 million vehicles.
Demand for passenger cars in South America fell well short of the prior-year level in the reporting period. The region recorded the sharpest absolute market decline worldwide, with its lowest new passenger car registration figures since 2009. This was primarily due to the weak automotive business in the single market of Brazil, where the number of new registrations fell by 9.4% to 2.5 million units. Due to a weak economic environment, higher interest rates and reduced consumer confidence, market volumes in Brazil were also at their lowest level for the past five years. The above-average decline in the number of imported passenger cars, also as a result of the devaluation of the Brazilian real, reduced the proportion of new registrations accounted for by imported passenger cars to 15.3% (17.0%). Brazil’s own vehicle exports slumped by 40.9% to 335 thousand units due to the weakness of the Argentinian market, among other factors.
The passenger car market in Argentina contracted sharply in 2014, falling by 28.8% from the previous year’s record high to 461 thousand units. In addition to the tax increase on higher-value passenger car purchases at the beginning of the year, buyer reluctance due to decreasing real incomes and sharp increases in interest rates, as well as import restrictions on new vehicles, all contributed to this development.
The Asia-Pacific region was again the main driver of demand for passenger cars worldwide in the reporting period. The new high in the region was largely thanks to the Chinese passenger car market, which recorded double-digit growth of 12.1% to 17.9 million vehicles. Despite further restrictions on registrations in some metropolitan areas and slightly slower economic growth, the positive momentum on the world’s largest car market continued in 2014. This trend was bolstered in particular by the above-average increase in SUV sales.
In Japan, the number of new vehicle registrations rose moderately year-on-year, at 4.7 million units (+2.9%). The consumption tax increase as of April 1, 2014 led to pull-forward effects in the first quarter and significantly dampened demand in the rest of the year.
Passenger car sales on the Indian market increased slightly in the reporting period, up 2.2% to 2.4 million units. In particular, the cut in excise tax rates – for vehicles, among other things – which was extended to the end of 2014 supported the recovery in the automotive markets.
In the ASEAN region, passenger car sales declined by 4.4% to 2.3 million units due to a slump in demand in Thailand. Other markets in the ASEAN region posted strong growth in some cases.
REGIONAL DEMAND FOR COMMERCIAL VEHICLES MIXED
Demand for light commercial vehicles was down slightly year-on-year. A total of 10.7 million vehicles were sold worldwide, representing a decline of 1.3%.
The demand trend in Western Europe was positive thanks to the improved economic environment. Sales were up 8.5% on the previous year, at a total of 1.5 million vehicles. The highest growth rates were recorded in the United Kingdom, Spain and Italy, and Germany saw a year-on-year increase of 4.6%.
Vehicle sales in the Central and Eastern European markets fell short of the comparable prior-year level: 296 thousand (323 thousand) vehicles were sold in the reporting period. Demand declined in Russia and Ukraine due to political tensions and their economic impact. However, many smaller Central European markets recorded growth.
In North America, light commercial vehicles up to 6.35 tonnes are allocated to the passenger car market.
Demand for light commercial vehicles in South America declined to 1.2 million units in the reporting period, down 7.8% on the previous year’s level. Among other factors, the decline in demand was attributable to the difficult economic conditions in the region. However, Brazil exceeded the 2013 figure thanks to higher demand for new SUVs, which are included in light commercial vehicles in this market. Despite the rise in the number of new SUV models registered in Argentina, demand for light commercial vehicles declined significantly as a result of the tax hike on higher-value vehicles at the beginning of the year.
At 6.8 million (−1.6%), vehicle sales in the Asia-Pacific region in fiscal year 2014 were down slightly on the previous year’s level. There were significantly more new registrations in China, which dominates the region, than in the previous year. A total of 4.3 million (4.1 million) units were sold there. Sales in India were down on the previous year due to higher interest rates, which had a negative impact on the economy. In Japan, pull-forward effects from a consumption tax increase as of April 1, 2014 led to a temporary increase in demand. However, unit sales were lower than expected in the rest of the year. Overall, the Japanese market declined slightly compared with the previous year.
Demand for light commercial vehicles in the ASEAN region was mixed. While a number of small markets saw strong growth, demand in Thailand declined sharply after government incentive programs expired.
Demand for mid-sized and heavy trucks with a gross weight of more than six tonnes fell short of the prior-year level in fiscal year 2014. With 2.4 million new registrations, 6.7% fewer vehicles were sold worldwide than in 2013. Demand dropped by 13.0% in the truck markets that are relevant for the Volkswagen Group.
In the Western European market, demand was down 9.1% compared with the previous year, with a total of 225 thousand vehicles sold in the reporting period. In 2013, unit sales were positively impacted by the purchases pulled forward ahead of the Euro 6 emission standard. In Germany, the number of new registrations was down slightly on the prior-year figure.
In Central and Eastern Europe, the number of new vehicle registrations decreased by 15.1% to 142 thousand units. In Russia, the region’s biggest market, sales failed to reach the prior-year level, declining by 21.3% to 81 thousand units. This was largely attributable to the low oil price, the still weak ruble and the more difficult financing conditions as a result of the tense political situation.
In the North American markets, demand for mid-sized and heavy trucks (more than 6.35 tonnes) reached 470 thousand (438 thousand). Impetus from the labor market, the construction and energy sector, and ongoing high demand for replacement vehicles in the heavy truck segment led to higher demand in the US market in particular. New registrations in the USA increased by 10.2% to 398 thousand vehicles.
Demand in South America was weaker year-on-year, at 198 thousand (235 thousand) units. The poorer macroeconomic environment in Brazil, high inflation and the recessionary trends in Argentina were the major causes of this decline. At 134 thousand vehicles, sales in the Brazilian market were down 10.5% on the prior-year level.
The volume of new vehicle registrations in the Asia-Pacific region (excluding the Chinese market) remained level year-on-year at 469 thousand. Demand in China, the world’s largest truck market, was down 14.5% year-on-year at a total of 783 thousand units. Alongside the slightly slower pace of economic growth, this decline was attributable to the diminishing pull-forward effects from the introduction of the latest emission standard, as well as other factors. Demand in India increased overall in 2014: new registrations were up 5.5% on the previous year at 195 thousand vehicles. A more favorable investment climate following the change of government in May 2014, new infrastructure projects and demand for replacement vehicles in the heavy truck segment were responsible for this development.
Demand for buses, both globally and in the markets that are relevant for the Volkswagen Group, was lower than in the previous year. In Western Europe, too, fewer buses were sold than in 2013. This was partly due to the introduction of the Euro 6 emission standard, which had pulled forward some of the demand from 2014 to 2013.
TRENDS IN THE MARKETS FOR POWER ENGINEERING
The markets for power engineering are subject to differing regional and economic factors. Consequently, their business growth trends are generally independent of each other.
The merchant shipbuilding market (for container and freight ships, for example) was again dominated by significant overcapacity in the reporting period. This situation was exacerbated by the continued high number of deliveries, which further crowded the market. Volatile but declining fuel prices and slightly rising freight rates helped counter this trend in the merchant shipping business. The further improvement in the financial situation of established shipping companies should also be viewed positively.
Overall, the merchant shipping market recorded slight year-on-year growth. Demand for special ships remained high in fiscal year 2014. The markets for government vessels, cruise ships and ships for transporting liquid natural gas (LNG) remained at the previous year’s high level. Due to the decline in the price of oil and the higher costs for international oil companies, new orders for drillships to exploit new reserves fell short of expectations. Overall, China, Korea and Japan remained the dominant shipbuilding countries. The marine market saw a slightly positive trend overall compared with the previous year.
Economic growth in developing countries and emerging markets, which are the key regions for MAN’s power plant solutions, slowed in 2014, although the demand for energy supply solutions is still high in these markets. The Middle East, Africa and Southeast Asia remained important regions. In North America, the project volume increased due to the availability of shale gas. Demand for decentralized diesel and gas engine power plants saw a significant year-on-year decline overall with a persistent trend away from oil-fired power plants toward dual-fuel and gas-fired power plants. However, the more difficult financing conditions and crises with global ramifications led to longer project lead times.
The market for the construction of turbomachinery such as turbines and compressors was mainly dominated by contracts awarded in connection with global investment projects in oil and chemical facilities. Project volumes remained high in the oil and gas industry; however, competitive pressure rose as a result of the weak US dollar in the first half of the year and the devaluation of the yen. Demand for turbomachinery in the processing industry remained at a low level in 2014 due to a slowdown in the relevant markets in countries such as China, India and Brazil, as well as the investor uncertainty caused by political crises. This further increased competitive pressure. The overall market for turbomachinery declined moderately compared with the previous year.
Although the after sales market recorded slightly positive growth overall in the reporting period, there was no return to the very high growth rates seen between 2010 and 2012.
The development of offshore wind energy again fell well short of the expectations in 2014. This was largely attributable to the ongoing technical problems, particularly in relation to infrastructure, and the limited financing options.
DEMAND FOR FINANCIAL SERVICES
Global demand for automotive-related financial services remained high in fiscal year 2014. Customers are increasingly optimizing their total spend on personal mobility, so the trend toward just using a car occasionally, rather than actually buying one, continued. Demand for new mobility services such as carsharing continued to grow.
In a difficult economic environment with stricter regulatory requirements, demand for financial services increased in Europe. After-sales products such as maintenance agreements, spare parts and insurance saw an encouraging rise in demand. Sales of financial services were bolstered by higher vehicle sales, which resulted in particular from a recovery of the Spanish market and continued market growth in the United Kingdom. Demand for financial services benefited considerably from the still high penetration rates.
The finance and leasing business again grew in Germany in the fiscal year. Alongside traditional finance products, expanding the insurance and service business was a particular focus.
In North America, demand for financial services in fiscal year 2014 was also up again on the previous year. In the USA, the market for new vehicle financing registered slower growth, while the market for leasing through captive financial service providers grew sharply. In Mexico, consumers were increasingly willing to make use of financial products, pushing the sales of financial services here to a new all-time high.
The negative macroeconomic trend in Brazil continued in 2014. This trend was also increasingly apparent in lending for new cars. Although the Consorcio product – a lottery-style savings plan – was very popular, it was also impacted by declining volumes in the passenger car market. In Argentina, the uncertain economic situation and new regulatory conditions dented sales of automotive-related financial services.
The Asia-Pacific region again saw growth in 2014. Many buyers used financial services to realize their wish for a car. In China, the proportion of loan-financed vehicle purchases rose to more than 25% in the past year. Despite increasing restrictions on registrations in metropolitan areas, there is still considerable potential to acquire new customers for automotive-related financial services, particularly in the interior of the country. Korea and India also registered sharp growth in demand for financial services, while demand in the Australian and Japanese markets remained stable at a high level.
South Africa recorded a similar positive trend.
The financial services market in the commercial vehicles segment continued to see a trend towards optimizing total costs in the mid-sized and heavy commercial vehicles category in 2014. Innovative transportation solutions are becoming increasingly important to customers for differentiating between providers.