European Car and Light Commercial Vehicle Production Outlook

European Car and Light Commercial Vehicle Production Outlook December 2015 SMMT, the 'S' symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd Contents Introduction and analysis overviews Page Individual Vehicle Manufacturer reviews Page Introduction 2 BMW 39 Executive Summary 3 Daimler 41 The Outlook for 2016 – better than might be expected? 9 Fiat 43 Market Overview & Country Summary 13 Ford 45 Alternative Scenarios 14 GM 47 Country Analysis 18 Honda 49 UK and France comparison 23 Hyundai – Kia 50 Key Country Developments 24 PSA 51 UK 24 Renault-Nissan-Dacia 54 The 2m units question 29 Suzuki 57 France 31 Tata Jaguar Land Rover 58 Germany 32 Toyota 60 Italy 33 Volkswagen Group 61 Spain 34 Volvo 63 Production Summary 36 Aston Martin 64 Other VMs 65 EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 1 Introduction This report continues the new style of reporting which we adopted at the start of 2014. This is intended to be more manageable for readers; we now exclude much of the detail on historic developments at each vehicle company, information which can be found in previous editions of the report available on the SMMT website. www.smmt.co.uk. In addition, the model level information for vehicle production outside the UK is excluded from the current versions, although this data is available from Ian Henry of AutoAnalysis. Our focus is increasingly on developments in the UK, to make the report more relevant for UK suppliers; many of these companies should see major new business opportunities with increased sourcing at the tier 1 level in the UK especially, as well potential business too for smaller suppliers at the tier 2 and 3 level. Our coverage now runs to 2020 and to make the tables and charts more manageable from visual point of view, we now provide coverage from 2010 onwards; data for earlier years is available in previous reports on the SMMT’s website. 2021 will added in the first report in 2016. In addition, this issue contains a number of alternative scenarios for European production to the Base Outlook. The continued uncertainty in Russia and potentially in the EU as a whole means that some less attractive possibilities for how European light vehicle production volumes might develop need to be considered. Please note that for the individual VM tables we have excluded Russia owing to the uncertain situation in that country. Details on AutoAnalysis’s forecast for Russia are also available from Ian Henry. The views and projections contained in this report are those of the author, Ian Henry of AutoAnalysis. They do not represent an official SMMT view. The projections regarding new model timings, changes in production locations and the associated production volumes shown here have been compiled on the basis of information from a variety of sources. In most cases, the vehicle companies do not provide official information on which models will be made at which plants, nor do they publicly provide detailed information on future volumes and timings. These projections have been prepared on the basis of judgments made by AutoAnalysis, taking into account the information, opinion and inside from a range of industry, press and analyst sources available at the time of compiling this report. Ian Henry of AutoAnalysis will gladly address SMMT members’ specific questions on this report. Readers’ comments and questions on this report will be greatly appreciated. Please e-mail: [email protected]. EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 2 Executive Summary Will 2015’s momentum continue in 2016? As 2015 draws to a close with Europe’s automotive market growing consistently, admittedly with some way to go before it recovers to past volumes and several vehicle manufacturers continuing to invest in new vehicles and expanding their manufacturing operations, it is reasonable to ask if this broadly positive picture will continue. We remain in a low interest rate and (officially at least) a low inflation environment; some key expenditure items, notably energy continue to rise, while across much of Europe real wage growth has been modest at best, or non-existent. However, consumers are benefiting from low oil prices, which are gradually feeding through into reduced fuel pump prices; and the car companies continue to offer attractive financial packages for their customers, helping to maintain sales, or rather helping to maintain a steady flow of new lease contract business. Some financial commentators continue to express concern as to whether the economic is too dependent on debt-fuelled consumer expenditure; a logical extension of this is concern as to whether the recent economic recovery has, as best, weak foundations and another crash or recession is not far away. With political turmoil in the Middle East showing no signs of being resolved and its impact spreading to Europe’s major cities with terrorist attacks, or threats of attack, and the migration crisis not being resolved, Europe’s policy makers have a tricky path to negotiate. The UK’s referendum on its EU future looms large on the horizon, although no date has yet been set for this crucial vote; whether this will be settled after rational consideration and debate or be decided by more emotional factors, and especially the failure of Europe’s politicians to resolve the migration crisis remains to be seen. Just as economic and indeed political uncertainty were key watchwords of 2014, and throughout 2015, they are likely to remain at the forefront of consumers’ and policymakers’ minds in 2016 and beyond. This will be reinforced by the continued economic stagnation and associated political uncertainty in Russia and Ukraine and fears of a possible downturn in China. With all of the above going on, it is not surprising that getting a reliable long-term, forward-looking view of Europe’s economic prospects is somewhat challenging. For all the uncertainties which abound, recent months appear to have been rather more stable than has been the case in much of the recent past; the slow recovery across the the car market and the much-reduced level of economic activity across a range of economic sectors is regarded by many observers as the ‘new normal’. Volkswagen emissions ‘scandal’ adds to the uncertainty In September 2015 the news broke that Volkswagen had been ‘cheating’ its diesel emissions testing for the US market; subsequently the company admitted that the same engines which flouted US laws had been fitted to a total of around 11m vehicles worldwide, a substantial proportion of which had also been sold in Europe. The long term impact of this issue for the company specifically and the industry as a whole will only become clear in the months and years ahead, although the financial cost to the Volkswagen group will certainly be substantial; depending on the size and timing of the fines and other punishments meted out by US and indeed European authorities, plus the multiple legal actions which will likely materialise soon, the emissions ‘scandal’ could be a ‘company breaker’. EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT December 2015, Page 3 Despite the political pressures on the company in Germany, it has yet to announce the full technical solutions for affected cars; repairs and technical adjustments are now expect to begin until March 2016 and while numerous threats of class action remain, especially in the US, it would not be surprising of the national and local/regional governments in Germany had already (unofficially) taken relevant decisions regarding preventing a complete collapse of the company: we believe a political decision will have been taken behind the scenes in Germany taken that Volkswagen as a whole is too big to fail. Whether it will be able to retain its dominant market position, especially in Europe, remains to be seen. For now, we have reduced our projections for production at the Volkswagen brand specifically by up to 10% and slightly less for the other brands in the group. However, until the company’s new strategy and indeed structure – which it was said to be working on prior to the emissions scandal breaking – and the costs of the remedial action and punishments which it will have to bear are clear, this re-appraisal of the company’s prospects is both provisional and potentially optimistic; the fall could conceivably be much worse if fines and punishments significantly reduced the company’s supply of investment funds. Toyota has largely recovered well from a number of serious technical recalls and faults in recent times, while GM does not appear to have suffered permanent damage from the faulty ignitions problems in the US. The difference with the Volkswagen case is the scale of likely US government and legal intervention; this will be larger and financially more costly for Volkswagen than was the case at GM and Toyota. Generally positive signs for the automotive market in 2015 Despite the political and economic uncertainty referred to above, 2014 saw something of a recovery in the European car market, with passenger car sales rising every month throughout 2014. This positive picture has continued in the first 10 months of 2015; March, June and August all saw year-on-year rises of over 10%, with July and September close behind at 9.5% and 9.8% respectively. For the first 10 months in total, European sales were up 8.2% at just over 11.5m, with all the major markets showing an increase, including Spain (+20.5%) and Italy (+14.7%). Exports of premium brands beyond Europe have continued to hold up well, while within Europe cheap consumer finance is widely available, making new car sales (or leases) comparatively easy to transact.

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