By on December 14, 2007

lodz08.jpgAutomobilwoche reports that November was an automotive watershed. For the first time in history, European car sales eclipsed American. From January to November of this year, the European Union (EU), Switzerland, Norway and Iceland racked-up 14,827,000 cars. That compares to 14,763,000 new vehicles (cars and light trucks) sold in the U.S. during the same time period. Automotive analyst Peter Schmidt of AID (Auto Industry Data) thinks it's more than a quirk. "Our forecast says that in the coming years, Europe will be ahead. We see 15.6m light vehicles being sold in the U.S. in 2008, as opposed to around 16.1 million in Europe… The established markets are satiated." The strong-growth regions of eastern Europe are the EU's car sales engine. Russia will account for some 2.3 million new cars per annum. "All this explains why German car makers are so healthy. There is no growth at home, but plenty to be exploited in other countries," says Schmidt. No surprise, then, that German carmakers have built up a spectacular war chest. Spiegel Online reports that BMW, Mercedes, VW and BMW have some €34b (about $49b) in their collective piggy banks. In 2007 and 2008, they may welcome an additional €26.5b. Unicredit Analyst Georg Stürzer thinks this means that German car makers will pay out generous dividends, invest in green technology AND finance large acquisitions. Uh-oh.

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18 Comments on “German Carmakers Uber Alles?...”


  • avatar
    Robert Schwartz

    They could buy Chrysler!

  • avatar
    joemoc1

    Again!

  • avatar

    But this time call it Jeep Benz!

  • avatar
    Phil Ressler

    Obviously, if you can drive to a new market, you have advantage, not to mention familiarity. Russia’s energy wealth is spreading beyond the oil oligarchy and helping to lift broader improvements in the Russian economy. It’s a one-legged stool for now, vulnerable to disruption, but it along with the tiger economies along Russia’s western frontier will swell demand for automobiles that the Germans are positioned to meet. As the EU has added countries, it’s population and wealth share have grown accordingly. This is a temporary burst but one that will keep German carmakers’ coffers robust. But GM and Ford can harvest some of that pent-up demand too, from both their European and some US export operations, and you can be sure that Toyota and the Koreans will be present. It’s possible Russia will decide to reboot its car business with investment and expertise help from European partners to the west. The only question is how rapidly the Chinese will attack the underbelly of the Russian mass market, which the Germans aren’t so well equipped to own.

    It’s also worth noting that Europe’s edging out the volume of the US market is still a per-capital shortfall in sales performance as that small advantage in volume is derived from a market now approaching 500 million people against 300 million here in the US. Russia is not in the EU but they are quoted for 2.3mm units? Is that in or out of the 16.1mm alleged for next year? What do the figures look like if you bundle NAFTA against the newly-inflated EU + Sz, Norway, Iceland? Uh…yup, North America still prevails. Are we supposed to feel small when Turkey joins the EU? Maybe we should annex somebody…. When does the EU become a country for the purposes of these measurements?

    Phil

  • avatar
    Martin Schwoerer

    Phil, Russia is not included in the above figures. It’s only the EU plus some traditionally-European countries.

    Certainly, I hope the piece does not sound triumphalist. And to say it is apples versus oranges wouldn’t be off the mark. For example, the European data does not include light trucks whereas the U.S. does. But in terms of cars-per-head, the U.S. is supreme and will stay so, quite possibly forever.

    The difference between the EU and NAFTA is that the EU is not only a free-trade zone but also harmonized in many aspects regarding the auto industry. Standards and regulations are the same — you don’t have different bumper standards as the U.S. vs Canada, or different emmission rules as in the case of California vs everyplace else. Conceivably, all that reduces development and business costs and could contribute to the efficiency and profitability of operations.

  • avatar

    Shouldn’t the accompanying pic prominently display a BMW instead of an Alfa Romeo? Just sayin.

  • avatar
    jthorner

    The European indigenous auto business enjoys a much more diverse and interesting set of competitors than does the US. The Germans, French and Italians all bring distinctly different sensibilities to the market. European makers have segments covered that the US doesn’t even have an entry in. Supercars, check. Over the top luxury cars, check. Minicars, check. Diesel or petrol in almost any size vehicle, check. Family cars in sedan, hatch or stationwagon form … buyers choice, check. Cheap and cheerful cars for the masses, check. World class luxury cars, check. Every imaginable segment except for the monster truck is covered by a vast number of interesting choices, and that is without even considering the European divisions of Ford and GM.

    Europe enjoys a highly competitive industry with a huge diversity of vehicle types and clearly different design sensibilities represented by strong German, French and Italian players. They make the US based auto industry look like a bunch of unimaginative idiots. Europe can crank out everything from the Renault Logan to the Maserati Quattroporte and cover all the bases in between. I’m jealous of their choices.

  • avatar
    CarShark

    @jthorner

    Well, I think part of that is that the French and Italians left with their tails between their legs about 15 or so years ago. They learned the hard way that Americans weren’t going to put up with unreliable cars with the Japanese providing more solid (if bland) models.

    The U.S. does have supercars. The Saleen S7 immediately comes to mind.

    GM’s bad diesels of the 80s effectively killed that market for 20 years, and now hybrids have a much cleaner image.

    About half of the vehicles sold in the U.S. are trucks or SUVs, which make minicars a worrisome proposition, even to this day.

    Americans don’t like hatches or station wagons, so that’s no shock.

    The cheap market is taken, and no one expects it to be cheerful.

    Basically, the reason the European car market is different now is because Europeans and Americans have different priorities. It’s that simple.

  • avatar
    Kevin

    Of course growth is a bit easier when you keep throwing more and more countries into the EU. One wonders how soon the EU will start adding African nations just to keep ahead of the U.S. in market-size stats.

    Nevertheless this is an example of recency bias, where someone assumes that what’s been going on for the past year or two has been codified as a new law of Physics. U.S. car sales have been going through a downturn for a few years, however I know of no reason to expect they will not ultimately rebound and return to 17 million cars a year and beyond.

    After all, the U.S. population, unlike the population of much of Europe, is growing. And the U.S. population, unlike that of Japan, has not lost interest in owning cars.

    I don’t see any legitimate reason that the U.S. of 1999 with a population of 280 million would have Lt. vehicle sales of 16.95 million, but the U.S. of 2009 with a population of 310 million would do much worse.

    Personally I expect that when the subprime/credit crunch stuff works its way through the system, there’ll be clear sailing for quite some time, and the market number to be looking for is 18 million.

  • avatar
    Andras Libal

    I am from Eastern Europe and I lived in the States for 5 years now. In Eastern Europe we were used to cars that needed constant servicing. Yesterday I joked with a Russian student about servicing the brakes, having two men, one at the brake calipers with the wrench, the other pushing the brake. Of course he knew what I was talking about. He was doing that all his life, just like I did, just like many drivers I knew did. And in our underpowered, all-mechanical cars we did push the limits … so you have a buyer segment that will want strong, fast cars, who knows how to drive a manual (and quite a bit about driving/servicing cars) and will pay for quality the moment they can afford it. Most of eastern Europeans I met in the States buy German cars, because they know the quality. Quality in the sense we are looking for quality – well built, massive, fast, strong, advanced. If you drive your car hard, then the most reliable cars are not the Japanese but the German cars.

  • avatar
    Geotpf

    Andras Libal-That’s simply not true. German cars, as a group, are less reliable than America cars, as a group, which are less reliable than Japanese cars, as a group. And Honda, Toyota, and Subaru are more reliable than the rest of the Japanese makes (the other Japanese makes really aren’t all that special in terms of reliability, frankly). A large part of this comes from the fact that the Germans suck at electronics which Japanese are very good at it, and the Germans have been loading up their cars with all sorts of electronic gadgets recently (see Part 3 of the editorials on car electronics for an example). So, yeah, twenty or thirty years ago, when cars were simpler, when we were just talking about vehicles that were mechanical objects instead of mechanical-electronic hybrids, you might have a point. But today, you’re far off.

  • avatar
    jthorner

    “Basically, the reason the European car market is different now is because Europeans and Americans have different priorities. It’s that simple.”

    My point is that the variety of vehicles available on the European market is much wider than that available from the Detroit 2.8. Perhaps part of the reason is that there are more players of consequence in Europe than there are to the US.

  • avatar
    hal

    I don’t get the headline. Surely Ford and GM are well enough established in the EU and the former USSR to get just as much advantage from growth in Eastern Europe as any of the German manufacturers? And aren’t Renault, PSA and Fiat in good shape now too?

    “When does the EU become a country for the purposes of these measurements?”
    The EU plus the 3 EFTA countries is a single market with common regulations etc.

    Since one of the main reasons to join a club like the EU is to boost your global influence keeping score is part of the deal, and yeah the EU will add as many countries as they can to maintain their share of global influence – particularly confronted with the rise of China and India.
    Who knows maybe Americans will look at Mexico differently once a home market of 300M isn’t so impressive anymore?

  • avatar
    jkross22

    The issue of size of market is analogous to CEO’s and boards of US based organizations obsessing with the stock price of their companies. It’s all short term thinking. Want to increase market share and build long term stockholder value? Make a better product. It’s that simple.

    Instead, the focus on “my market share is bigger than yours” ignores the root cause: someone’s making a more desirable mousetrap. It’s disappointing that the 2.8 hasn’t figured any of this out with all of their MBA’s on staff.

  • avatar
    maxxm

    No monster trucks? What about the MB Unimog and some of the other rather extreme commercial vehicles the company makes?

  • avatar
    speedlaw

    I always laugh when people say they are jealous of the cars in Europe. As a Bimmer head, I fully understand the beauty of a car built for a speed limitless world on a daily basis. I also understand that lots of cars here are not nearly as good as there, be they a Focus, or a Diesel BMW. Now to reality.

    The Average American drives a better car than an Average Euro. Really.

    Having spent some time in europe, the typical euro spends a HUGE amount more to buy and keep running his car. (not including gas) Registration fees in france are determined by engine size and transmission type. A small gas engine with a manual is cheap. A car like a Corvette, with a big v-8 and an automatic, thousands a year to register alone. In Germany, you pay by horsepower, with big tariffs the higher you go. The typical middle class euro car is way less than the typical middle class american ride.

    I’m a euro car lover. I had VW, BMW, etc, but once you get off the upper tier of cars, the average ride in the states is better. Would you prefer a Golf with a 1.6 liter motor or an Explorer ? There is a whole group of cars that you would not even attempt to sell here in the US. Look at CAR magazine some time.

    Lastly, the reason the Autobahn is such a big deal is because many of the cars in the middle lane can’t hang in the left lane. Unlike the US, where all cars can go 100 mph all day (not legally), many euro cars can’t .

    No one in the US understand the SERIOUS snob factors that go into the autobahn experience. The greenies who hate the Autobahn are more upset they can’t buy the AMG benz than the enviromental issues. They hate that the Benz moves their crapbox Polo over and the law agrees with the Benz. The fact that german cars all differentiate versions by grille is so you know if you need to move over or not for them. This is why the GTi Golf has the different grille than the 1.6 liter slow version.

    Yes, you can’t get a Honda with a decent motor, you can’t get a good Focus, but you would also not want to pay the amounts of money that these cars would cost. My small SAAB 9-3, in Europe, is the BIG family car.

    There’s a lot more to the ownership experience than “I want this car and they don’t sell it here WAAH waah wahh.

  • avatar
    jthorner

    It still is that case that the range of automobiles offered in Europe is far greater than that on offer in the US. Obviously I don’t want to move to Europe or I already would have done so.

    Personally I would rather drive a Jetta all day long than an Explorer. The Explorer is just a silly vehicle. It has less interior space for passengers and cargo than a Volvo V70 yet rides and handles like a truck. Other than for off-roading or towing I really don’t understand the attraction.

  • avatar
    virages

    speedlaw,
    Having spent some time in europe, the typical euro spends a HUGE amount more to buy and keep running his car. (not including gas) Registration fees in france are determined by engine size and transmission type. A small gas engine with a manual is cheap. A car like a Corvette, with a big v-8 and an automatic, thousands a year to register alone.

    Here in France, the engine size tax doesn’t exist any more. I think that it has been a few years. I do agree, however that owning a car here is a lot more expensive.

    There is a new law going into effect where cars will be taxed or de-taxed based on their carbon foot print. Low CO2 cars will have upto a 1000€ rebate at purchase while high CO2 cars will be taxed upto 2600€

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