Industry Trend Analysis - Healthy Domestic And European Markets To Support Autos Production - JAN 2018


BMI View : Vehicle pr oduction in Germany will experience growth of 2.0% in 2018 supported by a favourable outlook for the domestic and European markets. That being said, we expect declining vehicle demand in the UK and US will act as a drag on German-made autos exports.

We forecast a 2.0% expansion in vehicle production in Germany in 2018, totalling 6.4mn units. Breaking this forecast down, passenger car production will grow 2.0%, while commercial vehicle (CV) production will expand 1.8% in 2018.

Autos Production To Expand Further In 2018
Germany - Vehicle Production By Segment
f = BMI forecast. Source: OICA, VDA, BMI

Favourable Outlook For Domestic Vehicle Demand To Bolster Production

We believe that a favourable outlook for vehicle demand in Germany itself will be one of the primary growth drivers for our bullish outlook for domestic autos production. We forecast new vehicle sales in the country to experience growth of 4.1% in 2018, totalling 4.0mn units by year-end. Breaking down our forecast, passenger car sales will grow 4.0% while CV sales will expand 4.8%. Supporting growth in new car sales will be robust private consumption, while solid levels of business investment, online retailing and residential and non-residential construction activity will drive an expansion in new CV sales ( see ' Healthy Labour Market And Cheap Credit To Fuel Car Sales ' , May 12). We therefore believe that this will create the supportive environment for domestic manufacturers in which to expand their output.

Bright Domestic Outlook Bodes Well For Autos Manufacturing
Germany - Vehicle Sales By Segment
f = BMI forecast. Source: VDA, BMI

Healthy European Market Another Positive

Further supporting our bullish outlook for autos production in Germany will be a healthy European market, which accounted for 58% of German-made vehicle exports in 2016. We forecast vehicle sales in Europe to grow 3.8% in 2018. Growth in vehicle demand across Europe will be supported by strong economic growth, tight labour markets and ongoing loose monetary policy ( see ' Few Signs Of Overheating, But Risks Rising ' , October 12; ' GDP Roundup: Upward Revisions After Strong H117 ' , August 17) .

That being said, a decline in vehicle demand in the UK, which accounted for 14.2% of Germany's total vehicle exports in 2016, will act as a drag on our outlook for domestic autos production. We forecast vehicle sales in the UK to fall 2.1% in 2018 as consumer concerns over Brexit continue to intensify ( see ' Scrappage Will Not Be Market Saviour ' , September 19).

Solid European Demand A Tailwind For German-Made Autos Exports
Europe - Vehicle Sales, Units
f = BMI forecast. Source: BMI calculation

Decline In US Market A Further Drag

Further weighing on Germany's autos production will be a fall in vehicle demand from the US, which accounted for 13.8% of the country's total vehicle exports in 2016. We forecast new vehicle sales in the US to fall 1.5% in 2018 as we believe sales have peaked in the country ( see ' Sales Boost From Hurricanes But No New Record ' , September 20 ). With the US being Germany's second largest autos export market, this will prevent further potential growth in German-made vehicle production.