Global demand for passenger cars reaches new high
Worldwide, the number of new passenger car registrations increased slightly by 2.6% to 75.6 million vehicles in fiscal year 2015, exceeding the previous year’s record level. While Western Europe, Central Europe, North America and the Asia-Pacific region recorded significant increases in some cases, volumes in the passenger car markets in Eastern Europe and South America were again down substantially on the previous year.
The global passenger car markets turned in a very mixed performance in the reporting period: demand recovered in important sales countries in Western Europe, the Chinese market expanded somewhat more slowly than in previous years and Russia and Brazil saw considerable declines.
The sector-specific environment was to a significant extent influenced by fiscal policy measures, which contributed substantially to the mixed trends in sales volumes in the markets in the past fiscal year. The instruments used for this were tax reductions or increases, incentive programs and sales incentives as well as import duties.
In addition, non-tariff trade barriers to protect the respective domestic automotive industry made the free movement of vehicles, parts and components more difficult. Protectionist tendencies were particularly evident where markets were on the decline.
The passenger car market in Western Europe continued its catch-up process in the reporting period. At 13.2 million vehicles (+9.0%), the volume of new registrations reached its highest level in six years, although – compared to the pre-crisis years from 1998 to 2007 – it was still at a low level. This development was primarily due to positive consumer sentiment, an improved macroeconomic environment, low fuel prices as well as the reduction in pent-up demand. While demand for passenger cars in Spain (+20.9%) – which benefited from government stimulus measures – and Italy (+15.5%) saw double-digit growth rates, volumes in the passenger car markets in France (+6.8%) and the UK (+6.3%) rose comparatively moderately.
In Central and Eastern Europe, the total number of new passenger car registrations fell sharply in fiscal year 2015, by 23.3%, to 2.8 million vehicles. The decline in demand in Eastern Europe was primarily attributable to the massive slump in the Russian passenger car market, which contracted for the third year in succession due to the difficult economic and political situation. By contrast, the volume of demand in the Central European EU countries rose substantially, by 10.7% to 1.0 million units.
In South Africa, the number of passenger cars sold in 2015 fell by 5.8% to 414 thousand vehicles. The main reasons were a difficult economic environment, a rise in interest rates and a lack of consumer confidence.
In Germany, 3.2 million new passenger vehicles were registered in 2015, 5.6% more than in the previous year. This development primarily resulted from positive consumer sentiment, the strong labor market as well as a decline in fuel prices and low interest rates. This market volume – the highest since 2009 – was exclusively attributable to new registrations for business customers (+8.8%), while demand from private customers stagnated (−0.1%). The increase in passenger vehicle exports (+2.4% to 4.4 million vehicles), especially to Western European markets, facilitated the increase in domestic production (+1.9% to 5.7 million vehicles).
At 20.7 million vehicles (+6.1%), sales of passenger vehicles and light commercial vehicles (up to 6.35 tonnes) in North America exceeded the 20 million unit mark for the first time in the reporting period. In the USA, the market volume grew by 5.7% to 17.5 million passenger vehicles and light commercial vehicles, reaching an all-time high. The main reasons were high consumer confidence, positive employment and income development as well as favorable financing conditions. Demand was particularly strong for models in the SUV and pickup segments, which benefited additionally from the low fuel prices.
In Canada, the sales figures increased slightly by 2.6% to 1.9 million vehicles, thus beating the record set in the previous year.
Demand in the Mexican automotive market increased in fiscal year 2015. The number of passenger vehicles and light commercial vehicles sold rose significantly by 17.6% to a new record level of 1.3 million units.
In South America, demand for passenger vehicles decreased for the third year in succession in fiscal year 2015, dropping by 21.2% to 3.1 million units. The significant decline of the market as a whole was primarily attributable to the massive collapse in demand in Brazil, where the number of new registrations fell by 27.4% to 1.8 million vehicles. In addition to the tax increase on industrial products implemented at the beginning of the year, the persistent economic crisis and higher interest rates were the main causes of the lowest level of new passenger vehicle registrations since 2006. The weakness of the local currency, the real, was one of the factors driving the increase in Brazilian vehicle exports, which rose by 24.8% to 417 thousand units.
In Argentina, the volume of the passenger vehicle market fell by 7.2% year-on-year to 429 thousand vehicles. High passenger car taxation, an increasing reluctance to buy because of falling real incomes and the persistent shortage of foreign currency continued to have a negative effect on demand.
In the Asia-Pacific region, the number of new passenger car registrations continued to increase in the past fiscal year, albeit more slowly. Growth in the Chinese market also lost momentum as the economy slowed down. With a plus of 7.7% to 19.2 million units, the world’s largest single market nevertheless saw the largest increase in absolute terms. Contributing factors were persistently strong demand for attractively priced entry-level models in the SUV segment and the tax relief on the purchase of vehicles with engine sizes of up to 1.6 l that was introduced on October 1, 2015.
In the Indian market, at 2.6 million passenger vehicles the volume of demand was up 8.3% over the previous year. A favorable consumer climate, reduced interest rates and low fuel prices contributed to the increase.
In Japan, the number of new vehicle registrations fell by 10.2% to 4.2 million vehicles. In addition to pull-forward effects from the value added tax increase on April 1, 2014, which had had a positive impact in the previous year, the tax increase on mini vehicles (up to 660 cc) effective April 1, 2015 dampened domestic demand during 2015.
In the ASEAN region, passenger car sales declined by a total of 2.5% to 2.2 million units, due primarily to a slump in demand in Indonesia.
REGIONAL DEMAND FOR COMMERCIAL VEHICLES MIXED
In 2015, demand for light commercial vehicles was down on the previous year: in total, around 10.3 (11.3) million vehicles were registered worldwide.
In the Western European markets, demand followed a positive trend, driven by the economic recovery. Totaling 1.7 million units, the number of new vehicle registrations was 10.5% higher than in the previous year. The highest growth rates were recorded in Spain (+34.7%), Italy (+17.2%) and the United Kingdom (+15.0%). In Germany, the 2014 figure was exceeded by 4.0%.
Central and Eastern Europe, by contrast, saw a significant decline, with 278 (331) thousand vehicles registered. As a result of political tensions and their impact on the economy, demand in Russia was down sharply on the previous year. However, many smaller Central European markets continued to record growth.
For North America, the "light vehicle market" is reported as part of the passenger car market, which includes both passenger cars and light commercial vehicles up to 6.35 tonnes.
In the South American market, registrations of light commercial vehicles decreased to 1.1 million units (−13.9%) in the reporting period. This is due to the difficult economic conditions in the region. In Brazil, demand fell considerably short of the 2014 figure. In Argentina, the number of new registrations was 4.9% lower than in the previous year.
At 6.1 million units (−12.6%), demand for light commercial vehicles in the Asia-Pacific region was down on the previous year’s figure. In China, the region’s dominant market, fewer vehicles were registered than in the year before; here, 3.6 (4.4) million units were registered. The decline is primarily due to the slowdown in industrial production and to lower investments. The market volume fell in India (−7.8%). Here, the market for light commercial vehicles did not benefit from the economic reforms following the 2014 elections. In Japan, the increase in value added tax and the resulting pull-forward effects in 2014 led to a noticeable decrease in the number of registrations in the reporting period.
In the ASEAN region, demand for light commercial vehicles was mixed; the volume was down slightly on the prior-year level.
Global demand for mid-sized and heavy trucks with a gross weight of more than six tonnes fell significantly short of the prior-year level in fiscal year 2015. In total, there were 2.2 million new vehicle registrations, 9.1% fewer than in 2014. The volume of vehicles dropped by 11.3% in the markets that are relevant for the Volkswagen Group.
In Western Europe, the number of truck registrations rose by 14.4% to a total of 258 thousand vehicles. Due for the most part to the low prior-year level and supported by positive economic momentum, the markets in Spain (+38.3%), the Netherlands (+32.3%) and Italy (+26.5%) in particular recorded high growth rates. In Germany, Western Europe’s largest market, the prior-year figure was exceeded by a moderate amount.
In Central and Eastern Europe, the number of new vehicle registrations decreased by 16.9% to 117 thousand units. While the markets in Central Europe expanded, Eastern Europe was on the decline. In Russia, the tense and uncertain political situation, the economic decline, currency weakness and difficult financing conditions caused the number of new registrations to come in 44.2% below the prior-year level, at 45 thousand.
In North America, public and private spending in the construction and industrial sectors as well as favorable financing conditions boosted the positive trend in demand; in this region, 531 (483) thousand mid-sized and heavy trucks (6.35 tonnes or more) were registered. In the US market, the number of new registrations increased by 10.5% to 456 thousand units.
South America saw a considerable decline in market volume. Here, the number of new vehicle registrations fell by 36.3% to 127 thousand units. In Brazil, the region’s largest market, demand, at 68 (133) thousand vehicles, was down significantly on the prior-year level as a result of declining economic output and more restrictive financing conditions. The market in Argentina expanded by 14.7% to 17 thousand vehicles, but remained at a low level because of the economic downturn.
At 521 (459) thousand registrations, the volume of vehicles in the Asia-Pacific region – excluding the Chinese market – was significantly higher than in the previous year. Demand in India increased in the reporting period: a total of 266 thousand units were registered, 32.4% more than in 2014. This was attributable to demand for replacement vehicles in the heavy truck segment, rising infrastructure spending and the improved investment climate. Demand in China, the world’s largest truck market, was down significantly in the reporting period at a total of 539 thousand units, a year-on-year decline of 32.2%. This was due to the slower economic growth as well as the pull-forward effects in 2014 from the introduction of the C4 emission standard.
Demand for buses, both globally and in the markets that are relevant for the Volkswagen Group, was lower than in the previous year. Negative economic trends in Russia and South America led to a sharp decline in demand, but the markets in Western Europe expanded considerably.
TRENDS IN THE MARKET 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 again saw muted order activity in the reporting period. The slowdown in China’s economic growth and existing overcapacity had a negative impact on the entire merchant fleet. Bulk carriers in particular were affected by low freight rates. In the container ship sector, an increasing amount of capacity was decommissioned. Despite this, some new orders for ships with very high transport capacity were recorded. Because of their size, these types of vessels have lower operating costs and are primarily intended for use on fixed trade routes. The tanker segment benefited from positive market expectations and an increase in freight rates in 2015 compared with the previous year. A factor contributing to improving the income situation of shipping companies in the past year was that the currently low freight rates were offset by favorable fuel prices. On the other hand, the low oil price discourages investments in oil production in the offshore sector, which has led to a massive decline in ship building in this segment. Demand for cruise ships followed a positive trend. Gas-fueled ships were ordered for the first time last year as a means of reducing emissions and meeting environmental requirements. The special market for government vessels also continued to follow a consistently positive trend. China, Korea and Japan remained the dominant shipbuilding countries, accounting for a global market share of more than 80% measured in terms of tonnage ordered. The marine market as a whole declined significantly compared with the previous year.
Although there was continuing high demand for energy solutions in developing countries and emerging markets, the more difficult financing conditions and regional crises led to longer project lead times. Regions such as the Middle East, Africa and Southeast Asia remained relevant markets. Due to the availability of shale gas, the North American market continued to grow in importance. Demand for decentralized diesel and gas engine power plants was lower overall than in the previous year, while the shift away from oil-fired power plants towards dual-fuel and gas-fired plants continued.
The market for the construction of turbomachinery is mainly dominated by investment projects in oil and gas, the processing industry and power generation. The persistently low oil price caused leading oil and gas companies to slash investment, leading to project postponements or even cancellations. Even the processing industry suffered from low investment volumes because of the slowdown in growth in emerging markets and existing overcapacity in some industries, for example in the steel industry. Insufficient capacity utilization at many manufacturers and the low Japanese yen exchange rate led to increased competition. Overall, the market volume for turbomachinery in 2015 was below the prior-year level.
As in previous years, the market for offshore wind farms in Germany was characterized by uncertainty with regard to financing, infrastructure links and the government’s incentive policies, so that only few projects reached the award stage.
The after-sales market performed positively overall.
DEMAND FOR FINANCIAL SERVICES
Global demand for automotive-related financial services remained high in fiscal year 2015. 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 Europe, business with financial services products was buoyed by the good overall performance in Germany and signs of recovery in Western and Central Europe. These offset the negative effects from the declining unit sales volumes in Russia.
After-sales products such as maintenance and spare parts agreements as well as insurance agreements 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 and Italian markets. Demand for financial services benefited considerably from the still high penetration rates.
The finance and leasing business grew again 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 2015 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 continued to grow. In Mexico, sales volumes for financial services products reached a new all-time high, driven by increased customer interest.
In Brazil, the negative macroeconomic trend worsened further in 2015 compared with the previous year. 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, structural deficits and very high inflation continued to dent sales of automotive-related financial services.
The Asia-Pacific region again saw growth in 2015. Many buyers used financial services to realize their wish for a car. In China, the proportion of loan-financed vehicle purchases continued to rise 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. Australia, India, Korea and South Africa registered growth in demand for financial services, while demand in the Japanese market remained stable at a high level.
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 2015. Innovative transport solutions are becoming increasingly important to customers for differentiating between providers. Demand for financial services products rose year-on-year despite declining overall demand for vehicles in the relevant markets. The significant decline in truck and bus unit sales in South America had a negative impact, particularly in the core Brazilian market. However, this was offset by positive business growth in Europe.