Slower growth, but renewed vigor and innovative technologies
By Michel Gabriel
Growth, stagnation, or stabilization—how will the auto industry evolve in 2012? The unabated global demand for cars speaks in favor of stabilization. In 2011, 65.4 million vehicles were sold worldwide, and that number could grow to 68 million next year, a gain of 4%. But this projection carries a major caveat: financial markets must stabilize. Even in late 2011, the outlook for the European markets was not exactly promising, as the debt crisis continued to erode consumer confidence. Will this mean that stagnation is a more likely scenario for 2012?
First, the good news: The auto industry is approaching the new year with perceptibly fresh vigor. Major German and American automakers, as well as the Korean Hyundai Group, were the big winners in 2011 car sales, clearly consolidating their world market positions with double-digit gains. Conversely, Japanese makers posted average sales losses of 11 %.
High and low performers
Looking at profits, automakers around the world performed well with an average EBIT margin of 5.1%. German companies were the most profitable, with a record average return of 9.9%. BMW tops that list with 13.2%. The only other automaker on par was Hyundai, with an EBIT margin of 9.5%. Lagging far behind, American companies averaged 6.1%, and Japanese attained an average of 2.8%.
Slower growth in 2012
The global automotive economy is expected to cloud over in the year ahead. Against the backdrop of the still smoldering government debt crises, the European auto market is expected to shrink by about 2% in 2012. Many projections suggest low single-digit growth rates for the U.S. (+2%) and China (+4%), though China is viewed as a growth engine and future center of gravity of the entire industry. Slight demand increases are also forecast for Russia, India, and Brazil. A distinctive rebound of +23% is anticipated in the Japanese market, which suffered a great deal in the wake of the earthquake and tsunami catastrophe in March 2011.
Competitive pressure on the rise
Market trends will favor automakers such as General Motors, Volkswagen, and Hyundai, all of which already occupy strong positions in core auto markets (i.e. the BRIC countries and the U.S.). The large Japanese automakers, headed up mainly by Toyota, will spare no effort to regain lost market share. In light of meager global demand growth, these factors will amplify competitive pressures and decrease profitability within the industry. In particular, predatory pricing will escalate, imposing considerable cost and margin pressure on automakers that dominate the European market (Renault, PSA, Opel).
Technology and mobility trends
Emerging technology trends, such as lightweight construction and innovative alloys, will continue to unfold in 2012 – and they will bring about reduced fuel consumption and other operational advantages. Players such as BMW and Audi have been advancing these angles for several years. Automakers will likely pursue raw material sourcing and prefabrication techniques because of the global shortage of know-how and production capacities. Strategic supplier relationships, therefore, will present a distinctly important advantage.
The deployment of in-car assistant systems will continue to enhance the value of premium and mid-range models. With the adoption of automatic parking assistance, blind-spot avoidance, land-departure warnings, and the like, passenger cars will move ever closer to partially autonomous driving.
Innovative mobility concepts are also advancing, with offerings such as the “Car2Go” by Daimler, the “Mu” by Peugeot, and the “Quicar” by Volkswagen. The impetus behind these concepts is the change in mobility needs of young urban consumers. In the urban hubs of saturated markets, car ownership is no longer a priority; the emphasis has shifted to highly efficient mobility. In many car-congested metropolitan areas, this is an approach that can meaningfully refine the concept of mobility, as evidenced by Zipcar.
Given the trends outlined above, brand strength and performance will become all the more important as automotive consumers become increasingly influenced by digital media. This presents a host of new opportunities for automobile brands. They will be called upon to systematically align their brand touchpoints with the specific brand experience and product benefits. Undoubtedly, 2012 will be a call to action for the entire automotive industry.