- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Technology Trends
- 10 Pricing Trends
- 11 Regulatory Trends
- 12 Market Size and Forecast
- 13 Market Outlook
- 14 Technology Roadmap
- 15 Competitive Landscape
- 16 Key Market Players
- 17 Strategic Conclusion
- 18 Further Reading
- 19 Appendix
Definition / Scope
The automotive industry of Germany includes passenger vehicle manufacturing, commercial vehicle manufacturing, as well as automobile parts and spares. Automotive industry is the backbone of the German economy since it contributes almost 20% to the overall industry revenue. The sector has traditionally focused on Research and Development in order to innovate and keep up with the needs of the market.
The German Automotive Industry recorded revenues of USD 480 billion as of 2017. This was a new record for the industry, recording a growth of over 4% compared to 2016. The higher revenue figures were driven by export earnings rising around 6%. Domestic revenues were also up by 2% during 2017.
German cars remain extremely popular among customers because of their high quality and better performance. Key players of the market include Audi, BMW and Volkswagen.
|Base Year||2017||Researched through internet|
The major risk for the industry is that there is a possibility of reaching saturation point. Car sales growth has declined in various European markets and there is a real risk that growth will slow down even further. For example, in Finland, car sales declined by 0.4%, in Denmark they were down 0.5%. In Ireland, the decline was as much as 10%. Saturation points have been reached in these markets and this trend is likely to continue.
Additionally, there could be a possible negative impact of Brexit. This is because now it will be harder to sell cars in the UK market. This also may result in higher export costs for the German manufacturers. According to estimates, Brexit could lead to a price rise of £3,277 for the cars manufactured in Germany and sold in Britain. This would result in an overall sales decrease by 550,000 vehicles.
The German automotive industry has also been hit my emission scandals. Companies such as Volkswagen have been found to under report their emissions, resulting in customers being mislead. If such a pattern continues, there is a real risk to the reputation of the industry.
Top Market Opportunities
German automotive brands are some of the most well-known around the world. This branding exercise has been successful purely based on the quality of the cars produced. This presents a big opportunity to grow in the near future. Export volumes can be increased further, based upon the brand building. Some of the top German brands in the UK include Audi and BMW.
Additionally, research and development is one of the key advantages of the sector. Most German automotive manufacturers invest up to 30% of their budgets on R&D, giving them a technological advantage over the rest of the world.
Another possible opportunity could be self-driven cars. In March 2018, Volkswagen announced its first self-driven car, which has no pedals or steering wheel. Such initiatives could help the German manufacturers in improving sales numbers in the future.
The first and foremost driver for the market is technology. German cars are built on cutting-edge technology resulting in great performance for the customers. This technology focus is also helping the industry in fulfilling the demand for advanced technological vehicles such as electric vehicles (EVs) and hybrids. The market is being driven by demand for EVs. More and more consumers are choosing EVs because of their efficiency and also the fact that they are environment friendly. Investment in the development of EVs and hybrids can help the industry grow further. EV sales in Germany doubled during 2017, to reach 54,500.
Another driver is that the regulatory environment is extremely favourable. The German government provides a number of incentives and subsidies to the industry in order to help it in achieving growth. For example, German manufacturer Daimler has received incentives worth EUR191 million over the past decade. The government has also been a major buyer of cars. Volkswagen has sold 15,499 vehicles to the German government over the last 10 years.
Domestic demand in Germany has been slowing. This has been a major restraint for the industry. During 2017, the sales growth rate recorded in Germany domestically was just 2.7%. This has been attributed to the saturation of the market as well as the overall economic slowdown. Weakness in the domestic market continues to persist, along with the other major markets such as France, the UK and Switzerland.
The major challenge faced by the automotive industry of Germany is that 88% of Germans already own a car. This means that the industry needs to create more demand for its products. This can only be made possible if there are newer models launched in the market by making use to research and development.
Another major challenge faced by the industry is the changing emission norms. There are now Euro 6 norms in place which monitor the amount of emission coming from each vehicle. In order to comply with the latest norms, it is important that the industry continues to innovate.
Hybrid vehicles have become the latest trend in the market. German manufacturers are launching more and more products which make use of environment friendly technologies. For example, nine out of the ten companies which filed patents in Germany in 2017 came from the automotive industry. This shows the true power of innovation in the industry.
Also, overall investment in infrastructure continues to increase in the industry. There is a lot of information sharing among the manufacturers as well, when it comes to technology transfer. This initiative ultimately benefits the whole industry. German Automotive OEMs are planning to invest more than USD17 billion in self driving technology.
In terms of pricing, the automotive manufacturers of Germany have tended to pass on the rising equipment costs to the customers. However, the rise has been gradual. Labour costs have remained stable in Germany and this has ensured that the car prices do not rise too rapidly. For example, the average cost of a car in Germany has risen from EUR29650 in 2016 to EUR30350 in 2017.
Various public funding programs in the country provide an environment of growth and development. For example, the German government has incentivised investment in the industry by making sure that bank financing is easily available. Further, there are subsidies provided to the companies who are investing in the development of environment friendly vehicles such as EVs. The government provided subsidies of up to USD 172 billion to the industry as of March 2017.
Additionally, companies can realise additional subsidies by building up a R&D workforce. There are governmental programs focusing on recruitment support as well as training support. A sum of EUR92 billion has been earmarked by the government for research and development annually. This takes place by the means of universities, non-university research institutions and government research labs.
Market Size and Forecast
The market size of the German automotive industry is USD 480 billion as of 2017. This was a growth of 4% compared to 2016. In the coming years, the industry is expected to grow further up to USD 516 billion by 2022. This is based on the trend that passenger vehicle sales as well as commercial vehicle sales will continue to grow in the industry. Further, as more and more vehicles are sold, this will also fuel the sale of original automotive equipment in the German market.
This growth will be driven by the growing demand for EVs as well as hybrid vehicles. Additionally, with the new emission norms in place in the European region, older vehicles will be gradually forced out of the market and replaced by newer models. This is also due to the CO2 emission reduction targets that have been set by the German government. By ensuring that the industry continues to innovate, the major players can achieve sustainable growth over the next four years up to 2022.
The German automotive industry has plans to leverage its strength in technology in order to ensure long term growth. For example, since petrol and diesel are not the preferred fuels for customers anymore, the companies are investing in other advanced technologies such as Hybrid vehicles. At the 67th edition of the Frankfurt Motor Show during 2017, the industry leaders stated that over EUR50 billion will be invested in Electric and Hybrid vehicles over the next decade. The commitment was led by companies such as Volkswagen and BMW.
The German automotive industry is one of the most competitive in the world. There are more than 10 operators in the market and all of them are established brands. Some of the key vehicle brands include Audi, Volkswagen and BMW. In terms of automotive part manufacturers, there are several others such as Bosch, Continental, Thyssen Krupp, Holding and Wabco. The competition has been tightening in terms of electric technology. For example, in 2017, Volkswagen announced that it aims to become the world's largest Electric Vehicle manufacturer by 2025.
The overall landscape in Germany is extremely competitive as the market is highly developed. Makers of vehicles as well as automotive parts focus on innovation in order to sustain their position in the market. Brands such as BMW have been awarded for their excellence in innovation. For example, in 2017, Daimler announced that it is investing EUR3 billion in the development of advanced diesel engines.
Key Market Players
Volkswagen: Also known as VW, it is one of the major automobile manufacturers in the world. It is headquartered in Wolfsburg, Germany. It was the largest automaker by worldwide sales in 2016. It was founded in 1937. The company is led by its CEO Herbert Diess. Its offerings include Commercial as well as passenger vehicles.
BMW: It is a German multinational company present in countries around the world. It is primarily engaged in the manufacturing of passenger vehicles, but also manufactures other equipment. It is headquartered in Munich, Bavaria. The full form of BMW is Bavarian Motor Works. It was founded in the year 1916.
Audi: Automobile manufacturer which is engaged in the production of passenger vehicles. It is a member of the Volkswagen group and is based in Ingolstadt, Germany. One of the most popular brands in the world. Its key subsidiaries include Lamborghini, Ducati and Italdesign Giugiaro. Key offerings include sedans, SUVs and coupes.
Daimler: A German automotive manufacturing company with presence across the globe. Daimler was founded in the year 2007 and is headquartered in Stuttgart. The company is led by its chairman of management board, Dieter Zetsche. The company's product range includes cars, buses, trucks and motorcycles.
Opel: Opel is a German automobile manufacturer, which was previously owned by General Motors. The company is now owned by Groupe PSA. The company is headquartered in Hesse. The company produces a range of products such as passenger vehicles, light commercial vehicles, and vehicle parts. Opel is one of the most well known brands in Europe.
The German automotive industry is a classic case of making use of technology to your benefit. German manufacturers were one of the first to produce electric vehicles. They are changing their product mix according to the needs of the market and are producing more and more vehicles that are environment friendly. The automotive industry is a major contributor to the German economy and its importance cannot be understated.
- Germany Trade & Invest
- Deloitte Global Automotive Report
Note: The market size of USD 480 billion has been converted from EUR422.8 billion based on the actual EUR to USD exchange rate.