Global Automotive Industry Survives Change
September 30, 2019After years of growth, sales in the global automotive industry declined last year, and the industry believes that the automotive industry is coming.
After entering 2019, so far, the pace of decline in industry sales has not stopped, and the winter is not over.
Sales decline throughout the world
According to recent data from the German Automobile Industry Association (VDA), in the first half of 2019, sales of the six major automobile core markets including China, the United States, Europe, Japan, India and Russia all showed a downward trend. Among them, the market decline in Europe, the United States and Russia can still be maintained within 5%, but the decline in Indian car market is as high as 10.3%.
Market consultancy IHS Markit expects global auto market sales to be 91 million units in 2019, down 2% from 2018.
According to the "Automotive News" data, in the first half of this year, US light vehicle sales fell 2.4% year-on-year to 8.418 million units, which is the third year of the first half of the US auto market in the past 10 years. Jonathan Smock, chief economist at Cox Motors, pessimistically believes that the US auto market will not improve much in the second half of the year, and may even be worse.
According to data from the European Automobile Manufacturers Association (ACEA), the total sales volume of the EU-27 and Norway, Switzerland and Iceland in the first six months of this year was 8.426 million, a decrease of 3.1%, of which June fell by 7.9% to 149.1. Ten thousand, this is the ninth drop in the past 10 months. Among them, the British car production and investment have suffered heavy losses. ACEA said in June that, given the uncertainty of the Brexit and the changing macroeconomic environment, the EU car sales forecast for 2019 has been reduced from 1% at the beginning of the year to -1%.
India is also experiencing the most serious impact in the past 20 years. According to data released by the Indian Automobile Manufacturers Association (SIAM) on August 13, as of July this year, Indian car sales have fallen for the first time in a row for nine consecutive months. In July, Indian car sales were about 123,000 units, a 36% year-on-year decline, the largest decline in 20 years. Among them, the number of self-use vehicles decreased by 31%, and the number of large vehicles such as trucks and buses decreased by 26%. Even in the two-wheelers, which are regarded as the main demand in rural India, sales in July decreased by 17% compared with the same period of last year.
The German Automotive Research Center predicts that there will be more than 4 million vehicle sales declines worldwide this year.
New and old technologies enter the transition period
PwC research said that the automotive industry's CASE revolution (Connected Car - Autonomous - Automated Driving, Sharing - Sharing, Electricity - Electric, also known as "New Four") has been On the arrival, executives of automakers such as BMW, Mercedes-Benz, Toyota, and PSA Group have publicly stated that the revolution is both a revolution of automakers and a new rival from IT and technology companies. . The CASE revolution is shaking the global traditional automotive industry, while environmental protection and other policies are increasingly squeezing the living space of traditional auto companies.
For auto companies, on the one hand, in order to meet the challenges of new technologies and new formats, companies need to invest a lot of money. On the other hand, funds invested in new technologies are difficult to achieve results.
Toyota executive director Bai Liuyi said at a briefing for trade unionists in December 2018 that in order to cope with the CASE revolution, companies need to invest more than 100 billion yen in development costs each year, and operating profits are facing a huge downside risk.
This situation has also spread to auto parts companies. Auto parts supplier Aisin Seiki executives acknowledge that if the car is fully electrified, its main product automatic transmission (AT) will no longer be needed. To this end, companies are desperately looking for ways to survive, such as expanding the production of automatic transmissions embedded in hybrid motor vehicles. Japan's auto parts manufacturer 曙Brake Industry said that in the context of deteriorating performance, the company focused on electrification and continued to develop new structure brakes. The total R&D expenses as of March 2018 reached 10.3 billion yen, expanding to net 13 times the profit.
The transformation has squeezed the financial and performance of the global automotive industry. According to reports, the investment and R&D burden associated with high technology has made the interest-bearing liabilities of global auto-related companies (about 380 companies that have published annual earnings reports) reach around $1.7 trillion in 2018. Earnings before interest and taxes (EBIT), which shows the profitability of the main business, was less than $220 billion, a slow growth. Under the headwind of the global economic slowdown, the company's performance growth is very weak.
For auto companies, the return on how much new technology can be invested still needs to be observed. The rising cost of production of automobiles, the rising prices of steel and aluminum, and the significant increase in new vehicle technology have all contributed to the rise in car prices. Economic reasons have become a cause of weak demand in the auto market.
Devin Savaskan, an industrial analyst at a US research institute, said that the auto industry is reorganizing and manufacturers are trying to adjust auto manufacturing costs. For example, electric cars and self-driving cars will not bring profits in five years.
As a result, investment funds are avoiding the traditional automotive industry, where the operating environment is deteriorating. The linkage between the trend of major auto stocks and the global stock market has dropped significantly, and the stock price has dropped significantly. According to statistics, compared with the end of 2015, global stock markets rose by 30%, but auto stocks fell by 4%.
The effectiveness of large-scale restructuring and mergers and acquisitions is still pending
From the United States to Japan, from India to the United Kingdom, from Mexico to Germany, news of layoffs and mergers and acquisitions of major auto companies has been frequently heard.
In order to adapt to the changing market, many auto companies began to adjust, such as GM, Ford and other American auto companies, in the past two years have stopped production of a large number of models. In accordance with the restructuring plan, GM has taken measures such as layoffs, production cuts, focus on electrification and autonomous vehicle technology, and at the same time identified the company's positioning as “responding to a potential economic recession”. Ford's restructuring involves a range of processes, from product development to automotive design to managing supplier costs. Ford executives are also required to reassess all aspects of the company's business to increase efficiency and save costs.
In South Korea, Hyundai and Kia plan to launch 13 new and modified cars in 2019. By 2021, Hyundai will launch a pilot program for self-driving taxis in South Korea and explore with industry leaders around the world on unmanned technology. The company plans to sell 1.67 million new energy vehicles by 2025, involving 44 models.
Industry mergers and acquisitions are also underway. The merger of Renault and Fiat Chrysler (FCA) is a hot spot in the industry that has received much attention in recent months. If the merger is successful, it is estimated to save $5.6 billion, mainly from the development of electrification and autonomous driving technology. The combined new company will aim to take a strong position in the field of transformation technology, such as electrification and autonomous driving. Analysts believe that the Fiat Chrysler-Renault-Nissan-Mitsubishi Automobile Alliance, which was born after the successful merger, will also be the world's first super-large automobile alliance across Japan, the US and Europe, with annual sales exceeding 15 million. Compared with other auto manufacturers, it can promote negotiations with powerful companies outside the auto industry in a more advantageous position.
However, it is necessary to wait patiently for the "sweet fruit" brought about by the merger and acquisition. In the second quarter of 2019, Ford's mid-year results showed that profits in the second quarter plummeted 86% due to huge global restructuring losses. Despite this, in the face of the new challenges facing the automotive industry, the frequent cooperation between global automakers will continue.