At a press conference in Detroit on Monday, January 9, 2017, Matthias Wissmann, President of the German Association of the Automotive Industry (VDA) said the year 2016 had not only political surprises in store for us. The automotive year was a turbulent one and generated huge challenges in particular for the German automotive industry, especially here in the US.
So we are all the more pleased that we can come to Detroit with good news concerning the markets. The global passenger car market will grow by 2 percent in 2017 to reach about 84 million units. We expect Western Europe to show stable development, totaling 14 million passenger cars (2016: 14.0 Million). China will expand by 5 percent to 24.2 million units. In 2016 the US market reached a new record with nearly 17.5 million light vehicles (passenger cars and light trucks). For 2017 we expect a similarly high volume.
The US light vehicle market has shown some noteworthy structural changes: While the share of passenger cars has been shrinking for years, the light truck segment has grown steadily; in 2016 it exceeded the 60 percent mark. In 2012 the proportions of passenger cars and light trucks were still 50:50. We assume that this trend will continue. SUVs, CUVs and pickup trucks are very popular with customers. The price of fuel – at around 2.20 dollars per gallon – is still low, so the higher consumption levels do not bother US customers.
What was 2016 like for the German brands on the US market? Of course it was a year of unusual impacts. Yet the German manufacturers saw their sales fall by a modest 4 percent, down to 1.33 million light vehicles (1.38 million in 2015). The German manufacturers remain especially strong in premium passenger cars and premium CUVs, taking a market share of over 40 percent in both segments.
We are also pleased that the German OEMs managed to make rapid progress in 2016 in the light truck segment: their 13 percent growth was nearly double that seen in this segment as a whole (+ 7 percent). Obviously we are offering efficient and attractive models for this growth market and can therefore continuously expand our market share in light trucks. Today, four out of ten new vehicles sold by German manufacturers in the US are light trucks. On the other hand there was a slump in the car segment, where the German OEMs have been well represented for many years. Their market share fell to 11.8 percent (12.3 percent in 2015). However, model cycles were one reason for this development.
German manufacturers take a large share of the US market for electric cars
The German vehicle makers enjoy a success story when it comes to electric mobility in the United States. On this, the world’s second largest market for electric cars after China, we pushed up our sales by almost a quarter in 2016. So now one fifth of all new electric autos sold in the US bears a German badge. And four out of ten electric models (BEVs and PHEVs) available in the US are German group brands, and more models are planned for the near future.
Our industry is pursuing a worldwide e-mobility offensive – by 2020 we will treble the number of electric models (PHEVs and BEVs) we offer to around 100 – and here the US market plays a key role. This is because here, too, reducing CO2 emissions is on the agenda, and electric mobility is absolutely essential for this – as is the further optimization of efficient combustion engines.
German manufacturers have quadrupled their US production since 2009
For the German auto makers, the US is not solely an important market but now more than ever it is also a major production location. We view investments here and the international exchange of goods as very intertwined.
German manufacturers and suppliers have greatly expanded their activities. In the period from 2009 to 2016, the German manufacturers quadrupled their production in the US from 214,000 units to 850,000, while overall light vehicle production in the US doubled (from 5.6 million light vehicles to 11.9 million). The German suppliers have trebled the number of their US facilities during the past 20 years to over 430 – which is the greatest increase in any region of the world.
That is a clear commitment to the US as an industrial location!
Cooperation and accessible markets, free trade and direct investments are two sides of the same coin, bringing prosperity and jobs to people on both sides of the Atlantic. This is because our companies have increased both production and employment during recent years not only in the US, but also in Germany.
One half of all German cars produced in the US is exported
Where do our cars produced in the US go?
- 41 percent are sold in the United States.
- We export nearly one quarter from the US to Europe and nearly one quarter to Asia.
- The other NAFTA countries (Mexico and Canada) receive 6 percent.
This means that just over half of the jobs that the German manufacturers have created here in their US plants depend on exports. At present the German auto makers employ about 33,000 people in their US facilities. The German suppliers, whose customers here in the US include both American and international OEMs, employ a massive total of 77,000. Furthermore, the US is the country receiving the highest value of exports from Germany; 545,000 new vehicles were exported from Germany to the US (-12 percent). This points up the close ties between Germany and the US.
US and German automotive industries wish to see trade barriers reduced
What do we expect in the United States in the foreseeable future? Donald Trump has announced infrastructure programs and tax relief. Wall Street has risen strongly in the last two months, which is a sign that investors are feeling optimistic. We expect demand within the US to increase. We are therefore confident that the light vehicle market in the US will develop well this year.
For us, the question of how Washington will value globalization in the future is particularly important. One thing is clear: the US is a very important market for the German automotive industry, and conversely vehicle production in the US is also dependent on exports. The automotive industries in both the US and Germany have expressed their support for a trade agreement that has fewer non-tariff trade barriers and eliminates import duties as far as possible.
We assume that the new administration will aim to strengthen US industry. This industry includes many production facilities of German manufacturers and suppliers here in the United States, which export a large share of their products. We hope that the new president will be open to this trade-policy interest of his domestic industrial base.
The transatlantic free trade agreement TTIP brings advantages from a US perspective: the existing hurdles that result in high monetary costs and a lot of bureaucracy due to differing standards could be eliminated. And if the 10 percent EU import duty on passenger cars from the US were also abolished, TTIP would guarantee success on both sides of the Atlantic. We wait with interest to see whether the new US president will use this opportunity. And it would certainly also be smart not to call the absence of import duties within NAFTA into question.
The United States is a gasoline market
I am very keen to say something about diesel. It is well known that the US is a “gasoline market.” Diesels have always had a place here in the heavy duty commercial vehicle segment. And that is not going to change. But among light vehicles (light trucks and passenger cars) they have a niche existence. Here the proportion of diesels fell to 2.5 percent in 2016 (Jan.-Oct.) (2.9 percent in 2015). The share of diesels in the passenger car segment was a little over the 1 percent mark in 2015, and 0.1 percent in 2016.
The situation is completely different in Europe, where around half of all new passenger car registrations are of diesel vehicles.
Where do these large differences come from? One factor is the different regulations. The EU has the strictest CO2 limit values in the world, and they can only be attained with diesels. The US, on the other hand, has very stringent NOx limit values, and therefore plug-in hybrids are an appropriate solution here. This means that diesels will remain important for the German automotive industry, especially on the European premium market.
In contrast, diesels will play only a minor role in the US. We are not turning our backs on diesels, and German manufacturers still have diesel models in their portfolios. But we are staying realistic: major growth potentials cannot be expected for the time being. We are also maintaining our wide-ranging activities in many drive train technologies, most of all in even more efficient gasoline models and electric mobility.