As published by Atradius, last summer appears to have boosted consumer confidence on the one hand and the auto industry on the other. In the United Kingdom, this appears clear from record number of new car purchases and the amount of investment in production facilities from luxury brands such as Jaguar, Land Rover and Bentley, as well as Nissan and Toyota. Just as the sales dynamics are not surprising in China, the most populous country in the world, where auto sales are rapidly increasing and the growth potential is very large in relation to the low vehicle density, fewer than 100 cars for every 1.000 people. The automotive industry also is a vital element ofSpanish economy, especially as regards exports to EU markets. In particular, German and Czech manufacturers recorded the highest profits this year. However, le consequences of the Ukrainian crisis are already impacting German sales to Russia and could threaten Czech industry exports if further sanctions are approved. Elsewhere, the trends are much less positive. See the slight rebound in car sales in France which however cannot mask the problems faced by suppliers, while in Italy sales are still subdued, an indication that arises from the general trend of private consumption. overseas, Brazil and its buoyant auto industry have fallen victim to an economy on the verge of recession.
The Czech automotive sector benefited from a recovery in global and domestic sales. The economy is in full recovery, with national GDP expected to grow 2,5% in 2014 and 2,8% in 2015, after a contraction of 0,9% in 2013. This is reflected in new car registrations, which increased by more than 10% in period January-August 2014: in August only 20% increase compared to the same period of the previous year. Production itself is on the rise, up 46% from July 2013, while orders have increased at double-digit rates. Profit margins for Czech auto companies have also increased thanks to consumer demand. However, this growing need for production levels requires a greater endowment of working capital, leading producers to become heavily dependent on bank loans. In the current scenario, banks are currently willing to provide credit to this sector: on average, payments in the Czech automotive sector take between 30 and 45 days. with the number of insolvency notifications falling in the last two months and relative stability is also expected in 2015. And while the Czech automotive sector has not yet felt the effects of the Ukrainian Crisis, any escalation of the situation or further sanctions (for example on car imports into Russia) could have a serious impact due to the high export dependency.
According to the German VDA, German passenger car production increased by 3.4% in 2013, with +1% domestic production and +4,9% exports. In the period from January to August, both production and sales grew by 4%, while new car registrations increased by 3%. The share of production outsourced abroad continues to increase, from 57% in 2011 to 61% in 2013 and should reach 68% by 2018. China is already a very important market for many German manufacturers: currently contributes to 35% of global Volkswagen sales (25% of BMW and 22% of Daimler). Tuttavia, barriers to market entry in China are on the rise and, given the modest growth of the car market in the other BRIC countries and in the Eurozone, no real alternative is seen should Chinese economic growth deteriorate. In addition, the recent decision taken by the Chinese government against the alleged price fixing of foreign production will increase the pressure on sales prices. The decline in sales in Russia in the wake of the Ukrainian crisis has already had a negative impact on German suppliers, while the ruble continues its depreciation parable. With the uncertain geopolitical framework, several suppliers to the German automotive industry are currently reviewing their investment plans in Russia, where in 2014 VW cut production to 30.000 units from 120.000. Despite this, profits stand at good levels and, in general, solvency and liquidity are robust. However, margins have decreased in recent years, due to the increase in the price of materials and labor and exchange risks. At the same time, suppliers have had to invest overseas in specific branches of engineering and manufacturing in order to be close to target markets. There is also a growing process of concentration in the segmentation of suppliers. The industry's overall debt remains manageable and banks are generally willing to provide loans to auto companies. The level of payment defaults and insolvencies is expected to remain stable in the coming months, provided that the currently shaky geopolitical environment (see Ukraine Crisis) does not deteriorate further, the slow economic recovery in the Eurozone continue and global demand remains stable.
