Auto sector
May 8, 2010
Auto parts suppliers, particularly in Germany, are benefiting from a surge in global car production that began at the start of this year.
Domestic and foreign orders with German suppliers rose 40 percent and sales 25 percent in the first quarter of 2010 compared to the same period a year earlier, according to the VDA automotive industry association.
The association expects global car sales to grow by 4 percent to 57 million cars this year compared to 2009. Market research and consulting firm PricewaterhouseCoopers estimates global car production this year will reach 64 million vehicles, down 4 million from the pre-crisis peak of 69 million vehicles in 2007 but showing a strong rebound over the past two years.
Growth in China
China will play a key role. In 2009, the Chinese car market experienced explosive growth, up 47 percent over the previous year to 8.4 million vehicles, according to VDA. In the first quarter of 2010, more than 2.8 million cars were sold. For the year the association forecasts a 16 percent increase in sales to 9.7 million vehicles.
VDA President Matthias Wissmann said German cars and component manufacturers have moved rapidly to establish local production in China. Within just two years, he said, German carmakers nearly doubled production in Chinese plants to 1.25 million vehicles, while increasing exports by 57 percent in the same period. Alone in the first quarter of 2010, German car sales in China soared 80 percent, accounting for every fifth new car registration in the country.
Signs are pointing to a recovery in the global car industry. The world's biggest car markets have shown double-digit increases in production in the first quarter of 2010 compared with a year earlier. The severe downturn in car manufacturing caused by the banking and economic crisis may, indeed, be over, analysts say.
Investments in global expansion
“The auto parts sector has gone through some pain over the past two years but the worst seems to be over,” Jack Sayer, an analyst with the Gerson Lehrman Group, wrote in a report.
Volkswagen, Ford and Fiat are among the many carmakers that have announced significant investment plans for their global manufacturing operations, especially in China and Latin America.
Despite the rebound, challenges continue to confront the industry.
The costs for steel, copper, platinum, plastics and other manufacturing materials are rising. The lingering effects of the global economic crisis, the possibility of more job cuts and the high level of consumer debt in key markets such as the United States may dampen the appetite of many consumers for a new car.
Author: John Blau
Editor: Sam Edmonds