July 25, 2012
The share of German passenger car exports going to other euro-area countries dropped from 48% in 2000 to just under 31% in 2011; in H1 2012 it even fell below the 30% mark. In parallel, the share of German car exports accounted for by the BRIC countries rose from just over 1% in 2000 to more than 17% in 2011, even though local production of German-brand vehicles in these countries was also on the rise during that period.
Diversification of sales markets by the German automobile industry thus started at an early stage and is not only the result of the current economic crisis in many countries of western Europe. Much rather, the shift in market share reflects the recognition that western Europe's car market is by and large saturated for the foreseeable future and that opportunities for growth can be found above all in the emerging markets. To tap this potential, companies are on the one hand promoting exports and on the other strengthening local production. Of course, a precondition for success is the fact that German cars, especially the premium segment, are very popular in many markets.
Germany’s automobile industry currently benefits considerably from its broad regional diversification as car markets outside Europe are on the up. This is why it is less affected at present by the problem of underutilisation of production capacities than its European competitors with their stronger focus on the home continent. Also important is the fact that profit margins are higher for luxury vehicles than the volume segment.
However, the regionally balanced export structure of its car industry is no guarantee that Germany will remain successful as a production location in the long run. Generally speaking, car production by German manufacturers outside Germany (e.g. in China, the US, Mexico and India) looks set to expand more strongly – for various reasons – than domestic production. This also applies to the supplier industries. In the global market, car factories in Germany will have to continue to compete with external competitors and other production locations within their own corporate group. And there is little to suggest that the intensity of competition in the sector will decrease.