Automotive industry. The perfect storm is catching up.

After seemingly endless years of success, a violent storm is gathering over the German car industry. It could be a perfect storm because the reasons are not just homemade. Something is brewing in Germany, and a key industry is showing weaknesses. At Audi, the signs are on alarm. In Neckarsulm 2018 ran only 186.000 new cars off the line, with a capacity of 300.000. And Ingolstadt is also only busy at 80%. And hopes for the production of the VW Passat.

Auto industry - the perfect storm picks up
Auto industry - is the perfect storm moving? Photo: Ute Kolla-Bliesener

The news runs across the industry. You can choose any. At Opel, every 3 has been sold to the PSA Group since its sale. Job dismantled, now are more 500 employees to go in Kaiserslautern and Eisenach. Ford is canceling in Germany 5.000 postsBosch is not just building in Bamberg Jobs and Daimler shocks with one billion loss and sends a profit warning to the stock market for the second time.

The problems of the commercial dispute

A German problem and homemade? The exhaust gas scandal is far from over, the political uncertainties surrounding possible driving bans unsettle private buyers. But there is more, and the gathering storm is global. As an example, Volvo can apply. The Swedes have a young range of models and they offer exactly what customers want. SUVs in all classes and sizes, the buyers reward the offer. And at first glance shows the current Half-Year Report good numbers. A record in sales and vehicles sold. With an increase of 7,3% Volvo is growing faster than the market, but the return on sales has collapsed. From 6,4% to 4,2% compared to first half 2018. With falling tendency, because in the 2. Q3 2019 continued to lower its yield to just 3,9%.

Gothenburg has been driving a rigid austerity program since the beginning of the year. On owner Li Shufu one can not hope, the main shareholder pawned recently acquired his shares in the AB Volvo for a 400 million euro loan. Volvo has become a victim of the trade dispute between China and the United States. The global production strategy of the Gothenburg carmaker is just waste. Instead of delivering vehicles from China to the US and vice versa, more Volvos from Chinese plants are entering the European market. The production change and transport routes nibble on the yield. Vehicles of Swedish production are more expensive to produce and are now - instead of Chinese vehicles - exported to North America.

China will not save the car market this time

A few years ago, the problems would have been manageable, because there would have been a solution. China was the magic word for decades. The largest market in the world, with almost endless possibilities. The automakers, especially the Germans, could reliably rely on the administration in Beijing. If the economy showed weakness, then some parameters were changed and growth was further fueled. That's over, especially as far as cars are concerned. And the reasons are in China, why many local factors can create a perfect storm.

In the first half of the year 2019, almost all automakers active in the Chinese market were able to sell their sales plans for the current year. The spoiled-for-profit Geely Group downgraded its annual targets by 10%, with other manufacturers targeting 30 or 40% of full-year sales targets. Some time ago, the Beijing administration would have stimulated the market, now leaving it largely to the customer's demand. And there are good reasons for that from a Chinese perspective.

Sales of electric cars, despite generous subsidies, not as expected. Although an annual increase in market share is prescribed by regulation, and the Requirements The range and the subsidy ability are constantly increasing. But domestic manufacturers remain well below their self-imposed sales targets despite a growth of 65% on 575.061 "New Energy Vehicles" in the first half of the year. Neither BYD, BAIC BJEV nor GAC reach 40% of their planned sales.

The numbers of the hopefuls are sobering

If you take a closer look at the hopefuls of the Chinese auto industry, then the dilemma is in full glory. Despite billions of subsidies for more than a decade, only very few brands are considered capable of international success. Among them are the electric car providers Nio and Xpeng. Nio delivered 2018 8.101 electric cars, it was 2019 in June 1.092 piece, And this despite the fact that the manufacturer is investing considerable resources in a network of charging stations and representative points of sale. Manufacturer Nio is considered one of the hottest candidates for the leap to Europe and maintains a branch in Munich.

Things are a little better at Xpeng. With Nio, the provider is one of the hopes of the Middle Kingdom, which is most likely to be considered an international success. After 371 electric cars in the year 2018 the numbers climb slowly, but steadily. In June 2019 have been already 2.237 delivered purely electric vehicles. A success, but far below the values ​​hoped for for sustainable mobility in China. And measured by the June sales of Volkswagen, 233.181 vehicles, maximum one footnote in the statistics.

Against this backdrop, Beijing will not save the car market, which turned slightly positive in June but is double-digit negative over the year. Because the government is not interested in a rising sales of burners, it relies on battery-electric drives and hydrogen. Further strengthening this market with subsidies is already time-consuming enough for them. In addition, finally put the long-awaited by Beijing shakeout on. Not on a voluntary basis, as hoped for. But through the brutal reality of a shrinking market. And the government should not be unwelcome.

Market shakeout in China

Small providers like Hawtai and Youngman Due to financial problems, there will not be much time left, both manufacturers were interested in Saab 2011. Qoros also can not fulfill its obligations and struggles with falling demand and empty coffers. And even with the electric car startups, the big dying begins. Changjiang, Enovate, Bordrin, Qiantu, Reech, Singulato, Zhidou and Hanteng are suffering from a shortage of money and will disappear from the market.

Beijing still dreams of half a dozen big, internationally successful providers. A strong export nation for mobility, that is the wish. The truth, however, remains sobering. In the first half of 2019 went international exports to return 4,69% to 487.700 vehicles. Only in electric vehicles, the statistics reads well. The plus of 105% in the export stands however also only for 5.339 cars.

Unused plants worldwide, shrinking profits. The crisis will expand into a perfect storm, the outcome of which nobody knows. A solution for the sale of burners, which are the focus of the critics worldwide, will not be found. On the other hand, the question of widespread adoption of electric cars is not only open in China, but no manufacturer can afford the weakness of not investing. At the same time, hydrogen, synthetic fuels and stricter emission standards continue to be on the agenda. Coupled with rapidly advancing digitization, this is an uncomfortable situation for an industry that has been on the sunny side for years. As a precaution, you should prepare for losses. For successfully withstood the storm is likely to succeed only the strongest.

15 thoughts too "Automotive industry. The perfect storm is catching up."

  • That's exciting again and enlightening. Vic Muller's hopes Youngman and Hawtai had no great future after all? In other words, the SAAB could not have saved either. Maybe it will continue with Evergrande, you may have some hope.

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    • Great report! Thanks Tom. You can not read such a thing in any car newspaper!
      For that I love the blog !!!

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  • Very revealing article! Thanks Tom for the fine research.
    I mean we have arrived in many sectors at an absolute saturation limit and that will be reflected in some industry.
    Almost everyone has everything in our latitudes and you do not always need more. And in other parts of the world, the means are lacking to consume in a big way.

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  • An article that has it all and absolutely strengthens me in the lines of hydrogen.Only yesterday discussed: "How, for example, a city wants to equip its parking garages for 1000 vehicles with electric charging stations? An unthinkable thought.
    And there are many bigger cities in Germany! An employee of the upper development days of the Daimler AG said yesterday, the e-car is only a short hype, it is the corporations only to the BILANZEN !!!!! These balances are now being beautified until the tornado continues to spread, he also said that the production of batteries and range options are exhausted. It can not only be SUVs that can be given large batteries to feed, the small cars with one Range at 60 km / h for 200 km can not be future.Solution: Hydrogen, with all the consequences, as Tom has already written. I asked why is not this made so transparent and the beetles further stringent deceived ?, Unfortunately no answer ... .. And China? The blue miracle on our blue planet is already clearer in sight than many believe.
    Just last week I brought back my old Saab, I drove in with his wonderful 4 cylinders and magnificent turbo technology from the year 2002 with 205 PS with no end 6,8 to 7,3 liters / 1ookm. Values ​​for a 17 year old car that are second to none. I deeply regret that SAAB is no longer there, I think we would have made a very good figure in the current time.

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    • A coincidence then that one backs the subsidies for battery cars in China, and drives up for hydrogen technology? I do not think so. At Hyundai, you even completely abandon the battery and dedicate yourself to the topic of hydrogen - and there is a former senior BMW manager now responsible for the entire development.

      The e-car is out of fashion before it was even in. At the end a small side note in the current automotive history. Other techniques are simply more meaningful (just for environmental reasons).

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    • In my estimation, the hydrogen train has left, in this direction, probably the next 10 years, at least in Europe, nothing great come. And how do I get to the assessment?

      For one thing, hydrogen is probably not yet fully developed in the industry. Google for hydrogen embrittlement, diffusion loss or hydrogen storage. Not everyone has it under control, and probably not even Toyota and Hyundai.

      On the other hand, they also have to sell it to the customers, and where was the storm on the LPG and natural gas vehicles? There are still statements that you do not want to buy such a bomb.
      On the other hand, in my opinion, propane and butane actually belong in the air conditioning, but out, among other things, the above reasons, you probably do not want to expect the customer, but has managed to buy without complaining, flammable R1234yf, that too Can produce hydrofluoric acid. And who really deals with it offensively and transparently? Most likely still Mercedes, but also do not really talk about it.

      And then there would be gas biggest problem: No one has money to build hydrogen refueling stations. With modest, rather than overwhelming success, it is being attempted to expand the charging infrastructure in order to push the e-car. And the turnaround is probably rather uncertain right now. Who should now have the money for a second such round with hydrogen? The vehicle manufacturers rather not and in politics, I do not see that either.

      Either we make our peace with what comes or not. But then what better comes, I do not see that.

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      • HYDROGEN

        Did that synonymous once researched. Unfortunately, everything right, what you say.
        In particular, the ability of the smallest of all atoms to diffuse through everything possible and impossible is quite astonishing and highly problematic ...

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  • .... well, the market regulates a lot, but not everything. SAAB was removed from the market by a group decision with many previous wrong decisions. So I can not buy the product I would like, real replacement with "I want to have" factor does not exist.
    Political decisions such as emissions limits, parking space shortages, driving bans, parking bans, changed traffic lights (no green wave), no E85 more, LPG with dwindling Steurvorteil, e-car hype have led me to the decision on business as private continue the 9-23 Years old SAABe continue to drive, sometimes to invest in some technology such as Apple Carplay (which is great in the 9-7x, incidentally, with LPG also environmentally friendly way is).
    Should something new be necessary because they do not let me as a landlady with my SAAB stinkers in the city, then it is nothing I buy. It could not be politically correct tomorrow, or you'll be left in the rain with head start by fraud. Well then I would fall back on offers such as Care by Volvo, because you are the vehicle going again when it is no longer oportun or exchange it in another. Well it's just the thoughts of an unsuspecting consumer who luckily still has enough space on the speedometer of his SAAB!

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  • The state of the automobile market was not so exciting for a long time. Large established players waver (but do not fall yet), many smaller companies seize the opportunity and previous niche providers secure their place (eg Volvo).

    For me, the perfect breeding ground for a brand like Saab, who thinks differently and had a solution than others were still looking for. Individual, different. Economical Turbos, BioPower and who knows if there would not even have been a hydrogen solution from the Stallbacka. Too bad that you will not be part of the future in Trollhättan.

    Or is it? Maybe it will take a second try?

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  • Thanks Tom, again (!) A great revealing article.
    The dimension of the "storm" is, I believe, really not yet detectable ...
    Change is always ...
    Whether only the "strong" come through the crisis, or "the best customizable" will show.
    On the sunny side it gets uncomfortable ...

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  • BROADENING HORIZONS?

    No, this article is far more than a banal look a little beyond. For now I can only say thank you. The complexity and dimension of what is said is yet to be measured ...

    For the moment, I am pleased with the input and with being on the right page. Where else do you get such food for thought and valid suggestions? This is unfortunately in short supply. Thanks Tom! ! !

    After the digestion process, I allow myself an opinion again. For the moment, I note (and suggestion) that the debate on individual mobility seems to be far more result-friendly (in terms of its energy sources and a national preference) than it seemed in the meantime ...

    That is really very, very exciting ...

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  • Although my heart beats for Swedish steel, I think you should not underestimate the German car industry. She has made mistakes, not only today but also in the past, but also quite a lot! The discussions that are going on at the moment are meaningless and should not only hurt the car industry, but the whole country. And there our policy should pay attention. It can be said that too much is being produced, which is true, but not only in the car industry. Electromobility is not the future, at least not for all traffic. And here, care should be taken that the batteries environment (people) friendly.

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  • Change or storm

    Difficult topic. It threatens the union of two automotive low pressure areas. Roughly speaking, China's national economic interests and the Chinese market are one of those storm lows. The other is the sword of Damocles technical change and a new mobility (including car sharing, autonomous driving, etc.), which globally hovers over the industry and at least felt daily sharpened sharper.

    On the other hand, the automotive reality of the present is astonishingly unimpressed. Meanwhile, car sharing had another quarter of a century to put an end to the automobile industry. Instead, it has turned out to be an additional business of established manufacturers and has opened up new target groups for them. The first hybrids reach Youngtimer status and meanwhile in my orbit somebody is waiting since half a year for his Wolfsburg diesel SUV (of all things) or just to get a binding delivery date ...

    The automobile presence is still dominated by individual possessions (including delivery times), gasoline and diesel. And if you look at the registration numbers, it's hard to even believe in an actual change taking place - let alone a full-blown and imminent Perfect Storm ...

    It will probably take a few more decades to move into the country until mobility and the industry have changed beyond recognition. Especially the mass extinction of Chinese EV start-ups or the economic difficulties and unfulfilled expectations of the "established" Chinese brands speak for this thesis.

    It is quite possible that a timely storm would sink above all the fragile fleet of electromobile gold diggers and spare the established shipyards of conventional ocean-going vessels ...

    But be that as it may, by far the safest are probably the big manufacturers who serve the market of today in parallel with each other, where they can tap sales and returns and set up their (electromobile niche) products for an uncertain future.

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    • As usual, the truth will be somewhere in the middle of this problem. For the burners probably comes on a broad basis, the 48V Mildhybridisierung, which can keep the current technology for at least a decade up to date, if it should therefore long to recognized plug-in hybrids, possibly even longer.

      However, it is unlikely that it will be possible to snoop around high-voltage plug-in hybrids and battery-electric vehicles if the announcements of various states and individual regions regarding a combustion license ban (https://www.autozeitung.de/zev-benziner-diesel-verbot-bis-2050-116894.html#), sometimes even bans on use (https://www.elektroauto-news.net/2019/amsterdam-verbrenner-verbot-ab-2030/), really should come as they are announced.

      This is also the opportunity for new players in the automotive sector, because the major manufacturers would probably like to do it as before, and want to introduce the innovations preferably top-down. It may only be too late to talk about 2030 for e-vehicles.
      If they behave smart, but every major manufacturer should also have his chance, as there are probably in 20 or 30 years somewhere in the world markets that take away burners, for example, Eastern Europe, South America or Africa.

      How to solve the charging problem, you will have to see. Probably the first to get around on an e-vehicle that can afford it and for the shop is not a big problem. For the others, better batteries, if they should come, or range extenders, perhaps with hydrogen, could be a possible solution.

      Autonomous driving may not be such a big problem. Presumably, semi-automated driving (eg stop-and-go in traffic jams) is relatively fast, in which the driver still has to be available as a backup when the vehicle feels overwhelmed because the defined parameters are left. Here the manufacturers can still shift the responsibility to the driver, if the car makes itself felt in time. The real autonomous driving (car drives alone)
      is, apart from the technical challenge, probably above all a liability-technical problem, what it could fail even longer, as it makes the impression at the moment.

      But the storm may come from a direction that is not talked about so clearly right now. If the US and China continue to deliver their trade skirmishes, which will turn into a full-blown economic war, then markets around the world could be in a downward spiral, with the car market perhaps only one of the smaller issues as people take more essential care have to.

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