European Car and Light Commercial Vehicle Production Outlook

European Car and Light Commercial Vehicle Production Outlook November 2012 SMMT, the 'S' symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd Contents Introduction and analysis overviews: Individual vehicle manufacturer reviews: About this report 3 BMW 61 Key Highlights 4 Daimler 68 Economic Background 10 Fiat (incl. Chrysler) 74 Automotive Market Overview 17 Ford 80 Overcapacity & Restructuring 22 GM 85 Demand Side Perspective 29 Honda 91 UK VM Summary 30 Hyundai-Kia 93 Production Outlook Overview 34 PSA 96 Country Rankings 48 Renault-Nissan-Dacia 102 Alternative Scenarios 52 Suzuki 111 Disclaimer 59 Tata – Jaguar Land Rover 112 Toyota 116 Volkswagen (incl. Porsche) 119 Aston Martin 128 Geely Volvo 129 Mitsubishi 132 SAIC MG 132 Saab-Spyker 132 Other Chinese – Chery and Great Wall 133 EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT November 2012 | Page 2 About this report This is the sixth 2012 Production Outlook report from AutoAnalysis. The next report will appear in January 2013. 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 provide detailed information on future volumes and timings. They 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 November 2012 | Page 3 Greek economy has not yet spread elsewhere, or any spread has certainly not Key Highlights been as extensive or widespread as some commentators feared might have been the case. The Greek economy is relatively small and its problems may be Economic recovery still a long way off … regarded as “manageable”; of greater concern is not so much what would happen in Greece and if it has to leave the Euro, but rather the situation in Following the 2008-9 economic and financial collapse, the global economy Spain, or even Italy. Spanish unemployment is around 25% now and in some began to recover in 2010 and continued to do so through the early part of 2011, age groups it is as high as 50%, hardly a recipe for social harmony. Economic albeit in a very uncertain manner in many parts of the world. However, since indicators in Spain are very poor indeed. then it has stuttered and in Europe especially, the picture is now uncertain at best, with recession having returned in some countries. Despite the supposed The UK and German governments appear to remain resolute in their “fiscally recovery in Q2, the UK may well return to recession come Q3, while severe austere” approach; the UK remains committed to cutting its deficit, and financial problems continue across the Eurozone. In addition, the US is facing although the Bank of England has extended its QE strategy still further, there its “fiscal cliff” – ie automatic tax rises and cuts in government spending if a is no substantive sign that the injection of over £300bn into the economy so far new budget is not agreed between the President and Congress by the end of has had the desired effect and increased real economic activity. the year. Consumer confidence – and consumers’ disposable incomes – in many The UK is retaining its low interest rate policy – as is the rest of Europe – and European markets have fallen significantly and this has had a direct impact on across the developed world, low interest rates are now the accepted norm and car sales as noted later in this report. 2012 will see significant falls in sales are expected to remain the norm for several years ahead. Conventional volumes in the major European markets, the UK excepted. Even Germany is economic theory had been that a low interest rate environment would act as an expected to turn in a total for 2012 below its 2011 level. encouragement to invest; however, the UK and Europe’s low interest rate Some financial analysts still speak of the fundamentally unviable nature of the environment and the UK’s recent quantitative easing have not yet resulted in Euro and these sceptics continue to regard it as simply a matter of time before renewed dynamism in the economy. the Euro project collapses entirely. The EU’s difficulties in terms of agreeing a The European Central Bank is thinking of cutting interest rates still further, but budget for the next five years have been widely reported – and even if an what happens when they get to zero has not been explained. Moreover, agreement has been reached by the time this report is published – it seems although the base rates are at all time lows, the real rates of interest being unlikely that the deep-rooted and severe structural problems of the EU will paid by consumers and businesses alike are much higher than the base rate, have been resolved. so the validity or practical impact of cutting rates any further must be The UK government’s expectations for economic recovery in the short term questioned. appear to be somewhat optimistic and any growth in 2012 will be less than 1%; Across Continental Europe, Germany excepted, severe problems remain according to Capital Economics, the UK’s GDP in H1/2012 was already 1.1% unresolved. Even Germany, for all its financial strength, is feeling the pressure below the level it had reached at the start of the recent dip; and more of being Europe’s saviour of last resort. Political pressures within Germany significantly more than 4% below the peak it was at before the 2008 collapse. remain resolutely opposed to further support for weak economies, especially In the light of all this poor economic news, it is remarkable how the Greece. automotive industry has continued to invest in the UK and plan for the Fortunately, although the manifold and deep-rooted economic problems in long term. The evident competitiveness of the Nissan plant and the global Greece have not been fully resolved, the much-feared contagion effect of the EUROPEAN CAR AND LCV PRODUCTION OUTLOOK REPORT November 2012 | Page 4 attraction of JLR’s UK designed and built vehicles have given the UK’s renewed commitment to its car and powertrain operations in the country – automotive manufacturing sector a great deal of hope for the future. closures and cutbacks at Fiat and Renault appear to be off the agenda for now. The strong export orientation of UK vehicle manufacturing insulates the UK By contrast, there are several VMs, especially the Koreans, the VW group, the automotive industry from specifically domestic economic problems, although it German premium brands, JLR and indeed some of the Japanese, for whom is far from protected from global economic ups and downs, especially those in the current economic uncertainty is less problematic than the traditional Europe. The UK also has a very strong export ratio beyond the EU, with its European volume brands. There are always going to be winners and losers – premium brands, Jaguar Land Rover, Bentley and Rolls-Royce all exporting what the current situation suggests is that the losers are going to be the over 50% and in many cases over 75% to beyond the EU: even Mini, which traditional volume brands whose recent and likely future restructuring may only traditionally exports around one-third of its output to beyond the EU, should serve to delay their eventual demise. reach over 50% non-EU exports in 2012. Although Mercedes has had to institute some slowdowns in production of its In addition, an important positive aspect to the UK’s automotive manufacturing largest car lines, it actually has capacity shortages for its new A-class range; sector is how many of the cars produced here are only made here in the UK, and in order to overcome this problem it has had to bring on stream additional ie the UK is the global supply point for many models. Although this does not capacity at a contract manufacturer, Valmet in Sweden. In parallel, to meet guarantee success, it certainly helps and does not expose UK manufacturing expected long-run expected demand for Minis, BMW has, we understand, to the risk of relocation which affects several plants in continental Europe. reached agreement with the new owners of the Nedcar-Mitsubishi plant in the Netherlands, to produce up to 100,000 upa there from 2014. Previously, in the light of the recent round of investment in UK car manufacturing capacity, we had asked whether, given the economic In the last recession, there was extensive government support across for the uncertainty in Europe as a whole, the automotive industry was bucking the industry, especially in France and Germany; now, we think such government trend in defiance of economic reality? Have other industries have accepted the help for the industry is unlikely to be available – European governments are all economic solution too meekly or are they the realistic ones? financially stretched to put it mildly, so there is limited room for the French government to act in the light of PSA’s announcements that it will close Aulnay Put another way, can the automotive sector lead the economy out of its slough and institute cutbacks elsewhere: initially, the new French government of despond and into recovery mode? The decisions this year, by GM, PSA described the decision to close Aulnay as “unacceptable”, but a few months and now Ford to restructure and cut out excess manufacturing capacity in the later it was described as “inevitable”! next few years suggests that the industry is beginning to face up to reality.

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