European Car and Light Commercial Vehicle Production Outlook

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1 Limited Edition: FREE copy European Car and Light Commercial Vehicle Production Outlook Produced and written by AutoAnalysis September 2010 For the full detailed analysis report, please click here

2 The AutoAnalysis European Production Outlook, July 2010 Executive summary Introduction The latest edition of the AutoAnalysis Production Outlook, provided exclusively to SMMT members, is now available for download. The latest report provides full coverage of recent developments at the European vehicle manufacturers in terms of their production plans and new model launches, as well as a detailed forward view of vehicle production volumes by model and manufacturing plant through to The independent report produced for SMMT has been prepared on the basis of judgments made by AutoAnalysis, taking into account the information, opinion and insight from a range of industry, press and analyst sources available at the time of compiling this report. The views and projections contained in this report are those of the author, Ian Henry of AutoAnalysis. They do not represent an official SMMT view. Key Production Outlook volume highlights In volume terms, the key highlights from the report are: 2010 is now expected to see a stronger than previously expected rise over 2009 production volumes, from 16.1mn units to almost 18.4mn units. The recovery in production volumes is underpinned by better than previously expected performances from several VMs and models, notably Citroen (DS3 and C3), Ford (Fiesta), various Hyundai-Kia models, Opel (Astra), Nissan (Qashqai) and vehicles across the entire VW group range, allied to an impressive new model programme from most VMs which will further underpin production volume growth. A further important contributory factor is the rise in export sales outside of Europe, especially to China and Asia By 2012, production volumes are expected to be just over 20.2mn, ie back to the production volumes achieved in This is a year earlier than previously projected. Although vehicle production across Europe fell by over 2.8mn units in 2009 (from 18.9mn to 16.1mn units) and this was in spite of the sales boost which came from scrappage incentive schemes across Europe we are now more confident than before regarding 2010 volumes. Our reinforced confidence, even allowing for the economic uncertainty comes from the acceleration in most VMs new model programmes and their collective strong sales performance, on a global basis, through to August VMs are also restocking their distribution channels which had been depleted during the scrappage schemes and increasing their export activity beyond their core European markets. The financial and economic stabilisation package agreed by the EU finance ministers, the ECB and IMF earlier in the year appears to have prevented the Greek debt crisis from spreading to other markets and destroying consumer confidence. Although it has not gone away, the risk of a double-dip recession has not been realised. 2

3 It is true that European sales have seen a fall in the summer months in some markets, but so far this has not been reflected in production volumes. 3

4 The following table provides a summary of European car and LCV production through to 2014 by country: Country Austria 202, ,911 61, ,352 69,300 77,900 73,150 70,400 Belgium 851, , , , , , , ,750 Czech Republ 931, , ,690 1,023,050 1,045,300 1,077,250 1,059,700 1,108,250 Finland 23,026 16,145 10,414 7,600 5, France 2,931,425 2,504,298 2,006,002 2,281,815 2,362,250 2,430,400 2,507,750 2,518,100 Germany 5,740,191 5,527,096 4,991,844 5,785,925 5,794,100 5,850,850 5,863,300 6,007,750 Hungary 298, , , , , , , ,000 Italy 1,233, , , , ,875 1,159,400 1,395,850 1,440,250 Netherlands 61,692 60,305 50,620 53,500 79, , , ,000 Poland 720, , , , , , , ,500 Portugal 167, , , , , , ,000 91,500 Romania 292, , , , , , , ,500 Russia 145, , , , , ,000 1,112,250 1,209,750 Serbia ,000 20,000 50, , , ,000 Slovakia 538, , , , , , , ,000 Slovenia 200, , , , , , , ,000 Spain 2,758,555 2,486,856 2,136,066 2,497,875 2,520,000 2,527,000 2,570,500 2,566,250 Sweden 340, , , , , , , ,500 Turkey 1,028,581 1,084, , , , ,400 1,071,250 1,038,500 UK 1,717,728 1,616,584 1,075,076 1,359,930 1,407,450 1,483,050 1,618,250 1,669,750 Grand Total 20,183,678 18,961,924 16,094,118 18,386,452 18,995,175 20,242,000 21,578,850 22,190,750 The detail behind these summary figures is available in the full report. Of particular interest is the rise in Russian production of European and Japanese/Korean brands; this accounts for almost 1mn units rise in production between 2009 and 2014, a rise which may well turn out to be an underestimate. The European and Japanese/Korean brands are increasing their activities in Russia and as this market opens up and consumer confidence grows further, we can envisage a further rise in production of western brands there, essentially for the local market. At this time, we do not see Russia as a production location for export back into Europe. However, in the long run this possibility should not be discounted. The risk of economic meltdown appears to have been averted Concerted government action, together with the ECB and the IMF, appears to have created an economic and financial package which has stabilised the economic and financial situation; as this appears to be holding, in view of the likelihood of continued low interest rates, accompanied by an acceleration of the introduction of new, small cars, we have been able to deliver our more optimistic forecast than that presented previously. While government deficits have to be cut, we believe that collective and individual government actions will be manifest in ways that do not destroy consumer confidence and undermine the recovery. The full report explains the economic context and notes how the UK government and most financial market analysts are still working on the fundamental assumption that the feared double-dip recession does not materialise. Reorganisation of vehicle production across Europe continues The restructuring and reorganisation of European vehicle production continues, but the widespread closure of assembly plants will not happen. A number of factories which we had previously seen as especially vulnerable and certain to close have received stays of execution for a variety of reasons. The pace of change in terms of 4

5 restructuring is going to be slower than we had thought as VMs recoil form major and radical change. The report highlights the following: BMW and Mercedes gradual re-orientation to small, fuel efficient cars (but without forgetting sports cars, especially at Mercedes). BMW s long term intention to add full production capacity, ie not just CKD assembly, in locations outside Germany, including Russia. Audi s expansion plans for Hungary, for both engine and vehicle production. The new GM Europe operation s commitment to its German plants, especially Bochum and Russelsheim; the uncertainty over the future of the Luton van plant in the UK remains, but we are more hopeful than before and we expect news on this plant s future in the next quarter. Having received full union agreement, Fiat will move some production back from Poland to Italy; the next Panda will be made at the Alfa Romeo plant near Naples in southern Italy. Production of the next Fiat MPVs will now be in Serbia, not Italy. Similarly, both Renault and PSA have retained production plants in France at close to full production. Following government pressure and support, Renault will bring van production back from the UK and Spain to France and it will also retain a proportion of the production of the next Clio in France; there had been suggestions that all Clio production would be moved to Turkey. PSA has had to increase production of the Citroen DS3 and now all the future DS models will be made in France (one DS model had been slated for production in Spain but will now be made in France). Interestingly, PSA has also stated how its plant at Vigo in Spain has a 25% cost advantage over its French plants and this is the one of the reasons which Vigo will, somewhat counter-intuitively, be the manufacturing location for the new low-models with PSA will launch. These will be for export beyond the main European markets, to the Mediterranean, Asia and Africa. Electric vehicles for PSA will almost certainly be made in Spain. Toyota has confirmed it will add a small hybrid to its French plant; for now we assume this will be a hybrid version of the Yaris. In the UK, JLR has yet to confirm whether it will close a plant or if it will retain all three plants; the company has, however, said it will expand the model ranges at both Jaguar and Land Rover. Overcapacity remains a serious problem Overcapacity remains a problem afflicting European vehicle production as a whole. However, few plants will definitely close; GM s Antwerp plant will close by the end of 2010 and Fiat will stop vehicle production at Termini Imerese in However, the VMs prefer to optimise their existing manufacturing network rather than making serious structural cuts in production capacity. Fiat has announced a major re-alignment of its manufacturing footprint between Italy, Poland, Serbia and Turkey and is looking to get all its plants working at the 5

6 same rates. PSA has cut shifts at a number of its French plants, but has had to add shifts at other factories, notably the plant making the DS series and the plant making the new C4. Daimler has seen most of its workers return to full time working as sales have picked up during the first eight months of 2010, while along with PSA, Nissan, Ford and Opel have announced additional shifts to cope with better than expected demand for a number of their models. Other examples of rising production despite the economic uncertainty are the BMW X1 and Dacia Duster. The VMs appear to be taking the long term view and also appear to be financial far stronger than they were in 2008 so if the fear double-dip recession comes to pass, the VMs should be in a better state to ride out the fluctuations. Electric and hybrid vehicles continue to grow in importance Electric and hybrid vehicles will become increasingly important in the make-up of European production in the next decade. Production of the Renault Kangoo and Fluence electric vehicles is now under way and the Renault-Daimler joint venture will include electric vehicles as well as conventional powertrains. 6