Trends in the automotive markets
In 2014, we expect to see mixed trends in the passenger car markets in the individual regions. Overall, the increase in global demand for new vehicles will probably be somewhat slower than in the reporting period.
The Volkswagen Group is well positioned to deal with the mixed developments in the automotive markets. Our broad product range featuring the latest generation of consumption-optimized engines gives us a global competitive advantage. We are pursuing the goal of offering all customers the mobility and innovation they need, sustainably strengthening our competitive position in the process.
We estimate that the demand for passenger cars worldwide will continue to increase in the period 2015 to 2018.
In Western Europe, we expect demand for automobiles to start rising again in 2014 after four years of decline. However, as the ongoing debt crisis is still unsettling consumers in many countries in the region and restricting their financial opportunities to buy new cars, we anticipate only modest growth. Particularly in core markets such as Spain and Italy, large-scale government austerity measures are also putting a damper on demand.
In Central and Eastern European markets, we expect a moderate increase in demand for automobiles in 2014 as against the prior-year level. The Russian market, which dominates this region, will be unable to compensate for the weaker 2013 demand in the short term and will see only a limited recovery in 2014.
We anticipate that the South African vehicle market will grow at a slightly slower pace in 2014 than in the previous year.
After recording initial losses, the German automobile market increasingly stabilized in the course of 2013. This trend is likely to continue in 2014, leading to modest market growth.
Although the uncertainty regarding US fiscal policy in the final months of 2013 had an adverse effect on consumer confidence, the market continues to benefit from pent-up replacement demand, a trend we believe will endure in a weaker form in 2014. We estimate that demand in the Canadian market for passenger cars will be on a level with the previous year, but are expecting to see a positive trend in the Mexican passenger car market in 2014.
Owing to their dependence on demand for raw materials, the South American markets are heavily influenced by developments in the global economy. Furthermore, increasingly protectionist tendencies are adversely affecting the performance of the region’s vehicle markets, especially in Brazil and Argentina, which have imposed restrictions on vehicle imports. In Brazil, the largest market in South America, demand for vehicles in 2013 was unable to keep pace with the high prior-year level in spite of tax breaks being extended. For 2014, when the tax breaks are expected to be extended, we are forecasting that the market volume will be only marginally higher than in the previous year. In view of the persistently high inflation and the challenging macroeconomic situation, we anticipate that the Argentinian market will contract sharply in 2014.
The markets in the Asia-Pacific region look set to continue growing in 2014, albeit at a slower pace. Increasing demand for individual mobility will drive demand in China in particular. After a weak year in 2013, India is likely to see volume growth mirroring the prior-year level, though this will depend on the general business environment. On the strength of the encouraging trend in the Japanese economy, in 2013 the local vehicle market sustained its prior-year level, when the market had been boosted by incentive programs and backlog effects. A previously announced tax increase led to pull-forward effects in the reporting period, as a result of which the overall market will probably decline significantly in 2014.
The markets in the ASEAN region are expected to continue their growth trajectory in 2014.
TRENDS IN THE MARKETS FOR COMMERCIAL VEHICLES
The markets for light commercial vehicles will also see mixed trends in the individual regions in 2014. Overall, we envisage slight growth in demand for light commercial vehicles in the markets that are relevant for the Volkswagen Group, and this will continue in the period 2015 to 2018.
Based on the easing of the economic situation in Western Europe expected in 2014, there should be a modest recovery in demand for commercial vehicles in many markets.
We believe that Central and Eastern European markets will perform better in 2014 than in the previous year. In Russia, demand will improve somewhat on the level recorded in 2013.
The North American market for light commercial vehicles will continue to grow in 2014.
In South America, owing to inflation and rising debt, we estimate that demand in 2014 will only marginally exceed the prior-year figure. The expansion of the market for light commercial vehicles is being driven primarily by the growing popularity of SUVs for private use, which are reported as light commercial vehicles in these markets. In addition, continuing protectionist trends are still having a negative impact on market growth, especially in Brazil and Argentina, which have imposed restrictions on vehicle imports. In Brazil, rising interest rates and low consumer confidence are adversely affecting the market, even though the tax breaks for new vehicle purchases are expected to remain in place for the time being. The Argentinian market is expected to experience only marginal growth in 2014 as a consequence of the macroeconomic situation.
The Asia-Pacific region looks set to see slight growth in 2014. We expect the market volume in China to be up slightly year-on-year. Provided that the economic environment stabilizes in India, an end to the downward trend is likely in 2014 following a weaker 2013. Japan benefited in the reporting period from the expansionary economic policy. We expect that the market volume for light commercial vehicles in Japan in 2014 will be down slightly on the prior year.
For the majority of the Asian automotive markets, including the ASEAN markets, we are forecasting further growth starting in 2014.
Demand for mid-sized and heavy trucks rose slightly in 2013, and we are also forecasting a small increase in total volumes in the markets relevant to the Volkswagen Group in 2014, mostly in the second half of the year. We are expecting growth to continue in the period 2015 to 2018.
In Western Europe, the economic situation will improve, but market trends will continue to be determined by the introduction of the new Euro 6 emission standard, which has pulled forward an appreciable proportion of demand to 2013. Thus, we anticipate a reversal of this effect to noticeably depress market levels in 2014.
In Russia, we expect to witness significant growth in demand in 2014. After predominantly weak macroeconomic development in 2013, this is expected to perform more positively in 2014. We are anticipating a rise in truck sales, although changes to the details of the recycling fee may impact this considerably.
Despite the uncertain business climate, demand for trucks in the USA is expected to rise appreciably in 2014.
We are forecasting a small increase in demand in 2014 in the Brazilian market on the back of higher demand for replacement purchases and additional state-sponsored investment and financing programs, while economic growth is expected to remain merely moderate.
The market volume in China, the world’s largest truck market, is likely to be sharply below the prior-year level in 2014. This is primarily due to the pull-forward effects in 2013 from the amended emission standards and the government’s infrastructure measures that are being gradually phased out and may lead to largely saturated demand for replacement vehicles in 2014. In India, we expect that the market will perform significantly better than in the previous year.
Demand for buses is set to noticeably exceed 2013 levels in almost all regions in 2014, buoyed by increasing urbanization and the growing need for coaches. We expect the bus market in Western Europe to be stable in 2014 and are also forecasting a slight uptrend for China, the largest bus market.
For the period 2015 to 2018, we estimate that demand for buses worldwide will continue to increase overall.