International automotive markets: VDA adjusts forecasts

In view of the current developments, the German Association of the Automotive Industry (VDA) is adjusting its market forecasts for the global market as well as the markets in China, the USA and Europe.

The framework conditions for the automotive industry have clouded over significantly since the beginning of the year. The scarce availability of preliminary products and raw materials, in particular the lack of semiconductors, continues to determine the markets. In addition, rising prices and the turnaround in interest rates in the USA and Europe are worsening financing conditions for consumers.

In addition, regionally specific challenges are having a negative impact on the automotive industry. In Europe, the Russian war of aggression in Ukraine has caused additional shortages along the value chains. In China, renewed corona lockdowns brought the market to a standstill in some regions. International supply chains are also affected by the logistics that have been affected by the partial closure of the port in Shanghai.

There are currently severe disruptions in China due to lockdown measures. For the year as a whole, we assume a decline of 2% to 20.7mn passenger cars. We had previously expected growth of 2%.

For the United States, we expect that light vehicle sales will fall by one percent this year compared to the previous year and that a market volume of 14.7mn light vehicles will be reached. Previously, we had expected an increase of 2%.

In Europe (EU27, EFTA, UK) we expect the market to stagnate at 11.8mn cars (±0%) in view of the delivery difficulties for the current year. So far we had expected an increase of 3% compared to the previous year.

For the German market, we are reducing our forecast from +5% to +3% (2.7mn cars). The order situation is still very good, the order backlog in Germany is even at an all-time high. However, the supply-side difficulties persist: According to the ifo research institute, 89.5% of companies in the automotive industry reported shortages of primary products in May.

For the global market, we expect a volume of 70.2mn units (-1%) for the current year. So far, a slight growth of 1% was expected. The market volume of the pre-COVID19 year 2019 had been undercut by 13% by the new values, the volume of the record year 2017 is now undercut by even 17%.

"It is now about the future of Germany as an industrial location"

On the occasion of the forecast adjustments, VDA President Hildegard Müller says: "The times for the economy and thus also for the German automotive industry remain challenging: Russia's ongoing terrible war of aggression against Ukraine, the tough corona lockdowns in China and the shortages of semiconductors and other preliminary products and raw materials are putting a strain on supply chains to an unprecedented and unforeseeable extent. It is all the more important to learn from the crises and draw the right lessons. It is now about the future of Germany as an industrial location."

Germany's dependencies are currently not only evident in oil and gas. "Germany and Europe need an active raw materials foreign policy and more energy partnerships. We must reduce our dependencies and focus on diversification. Far too little is currently happening in terms of energy and raw material partnerships, other countries are further along."

Müller: "Some people are already proclaiming the end of globalization. Russia's war of aggression against Ukraine, which violates international law, shows that Germany and the EU need to intensify their cooperation with other countries. We can no longer afford unfinished trade and investment agreements – TTIP, CETA, Mercosur – if we want to remain internationally competitive. We need bold trade policies."

The VDA President continued: "Germany finally needs an ambitious location policy: a reduction in taxes and duties on energy, an internationally competitive tax and duty system, less bureaucracy, faster and more effective planning and approval processes, more speed in digitization, in the Expansion of infrastructure and renewable energies. There is much to do. In order to achieve our ambitious goals for climate protection, the task now is to tackle it and implement it!"