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The problems that BMW, Daimler and Volkswagen are currently facing with their subsidiaries Audi and Porsche, as well as the foreign factories of Ford and Opel owned by Germany, have are typical of the global automotive industry.
Car manufacturers complain about lack of orders
The order portfolio for parts suppliers is one of the most accurate predictors of the situation in the automotive industry. In a long cycle industry, the purchase of details is planned well before the release of the final product – the vehicle itself. And if choral manufacturers complain about not having enough orders at the moment, automakers have been curbed.
"At the beginning, we performed calculations with a 3% reduction in car production, and now we expect less than 4.5%," said Stefan Azenckersbuumer, deputy general manager of the world's largest Bosch auto parts division, to the German business paper Handelsblatt. "Due to the contraction of the automotive markets, we have fallen far behind this plan," said Wolf-Henning Schneider, chairman of another leader of the ZF Friedrichshafen market.
The slowdown in the global automotive industry has affected the world's largest chemical group, BASF. It has factories in Germany, the United States and China, and around the world, its main customers of car manufacturers who order, for example, varnishes. On July 8, the German giant announced a sharp reduction in its operating profit in the second quarter, which forced it to significantly reduce its financial outlook for the whole of 2019.
Car sales decline more slowly than their production
To explain this decline, BASF referred to the marked slowdown in the growth rate of world industrial output – and first referred to the automotive industry. "The slowdown in the global auto industry has come out very strong, with world production falling by around 6% in the first half of the year." In China, the world's largest auto market , the contraction is twice as large and has reached about 13%, "said the official announcement of the chemical group.
Judging by the weakening of portfolios following orders from German component manufacturers, the industry's production volume could further decline in the second half of the year. Handelsblatt does not even exclude a crash. It's precisely the production, not the car sales. They have behaved for a while or so, especially because dealers have sold their shares with discounts. For example, in China, where the registration of a new car began to apply stricter standards for exhaust emissions as of July 1.
By the way, some automakers have already collapsed. The French group PSA, which owns the Peugeot and Citroën brands and the German Opel, sold 12.8% fewer cars in the first half of the previous year. The sales of its French rival Renault worldwide fell by 6.7%.
"Daimler "twice in three weeks lowered the annual forecast
In this context, the results of the German company, after the end of the first half, are not so bad. Daimler sold only 4.6% fewer Mercedes-Benz cars. Sales of BMW Volkswagen fell by 2.8% and BMW even rose by 0.8%. As a result, the Bavarian auto giant has managed for the first time in its history to sell more than 1.25 million cars in the first six months of the year.
But the financial results will be crucial. Volkswagen will present its half year data and new forecasts on July 25th. BMW, whose helmet unexpectedly announced its retirement in early July, will produce a detailed report on August 1. And maybe the bad surprises are maturing here.
On July 12, Daimler said the company was shocked by the announcement of a 1.6 billion euro loss in the second quarter, instead of operating profit, and also warned that, by the end of 2019, the results will be "significantly lower" than those of last year.
Thus, with one of the world's leading luxury cars, financial performance is deteriorating rapidly. This is the second decrease in Daimler's three-week annual forecast. Indeed, some of the money devoted to troubling issues is tied to a specific German story – the harmful emissions of diesel cars.
Autoproducer profits fall at the most inappropriate time
But Daimler's prediction that the profit margin of selling Mercedes-Benz cars is no longer 6 to 8%, and only 3 to 5%, has nothing to do with the diesel scandal: we talk about global problems the industry. In the context of global sales cuts, demand is driven by rebates, resulting in lower profitability. "We are seeing a lower margin for all car manufacturers and component suppliers, which is why the coming years will become a real test," said Alex Wahmmeister, automotive expert at Boston Consulting.
The problem is that the current cyclical downturn has surprised the industry in an unusual and extremely complicated situation, at a crossroads: the German and global automobile industry has rapidly transitioned from conventional engines to internal electric motors and fuels. alternative. At such a crucial time, it is necessary to invest heavily to deal with old and new competitors, like the American company Tesla, which sold in the second quarter a record number of electric vehicles: more than 95,000.
It is at this point that traditional builders are facing a sales crisis. In many countries, sales are particularly strong in China, affecting the US trade war, which has somewhat imposed this technological race on the entire automotive sector.
The electricity quotas put in place in Beijing by 2019, which will be even more severe by 2020, not only pursue environmental objectives, but are also part of the PRC 's industrial policy aimed at to support local producers. The announcement of these measures two years ago actually brought to light the German and foreign car manufacturers. They had to gradually accelerate the transition to electric power if they do not want to lose their positions on the giant Chinese market.
The high costs of deploying electric and hybrid models with declining sales and declining revenues will make things harder for manufacturers, and some may be bogged down. How in such a situation, do you stay not only above the water, but do you expect others?
One option is to strengthen your strengths through mergers and acquisitions. This late May attempted to make the Italian-American company "Fiat Chrysler", which proposed to the French "Renault" united on the same footing, but the agreement failed. The other option – the creation of strategic alliances, while maintaining its own independence. That's how Volkswagen and Ford work.
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