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Car industry faces major challenges

As the Detroit Auto Show unfolds, two big issues are at the center of debate in the automobile industry. Business in emerging countries needs to be boosted further, while in Europe it's all about damage containment.

There's good news for Germany's Volkswagen Group. The Wolfsburg-based carmaker excels in a new poll among automobile industry experts. "VW heads the list of companies with the largest growth rates," says Mathieu Meyer from the renowned consulting firm KPMG. He claims Volkswagen may well achieve its self-proclaimed goal of becoming the world's top car seller by 2018.

It's already been posting the biggest growth rates, with another German auto maker - BMW - in second position, according to the KPMG study.

Four Chinese firms among the top ten

VW Passat Varinat on the road Photo: Volkswagen dpa/lhe (zu dpa 0134 vom 29.12.2006) +++(c) dpa - Bildfunk++

VW brands such as Passat are a hit in many nations

Behind VW, BMW and Japan's Toyota, South Korea's Hyundai/Kia take 4th place. But among the top ten there are also four Chinese companies: BAIC, SAIC, FAW and Geely - none of them household names yet in the West. Also among 10 fastest growing carmakers is India's Tata, with its Jaguar and Land Rover subsidiaries.

"Among the 10 firms with the biggest growth potential in the sector, there are eight from the Asian continent," says Mathieu Meyer, "and most of them are from China. These are the companies which are likely to have the biggest potential over the next five to ten years."

BRIC states outshine Europe

Many pundits assume that output and sales figures will be contracting in Europe in the coming five years, with the biggest slump expected in Italy and Spain.

The situation in emerging countries tells a completely different tale. Production and sales are expected to grow further, above all in China, India, Brazil and Russia (also known as the BRIC states). By 2018, says KPMG, vehicles produced in the BRIC nations for their domestic markets will match the quality of those made in the industrialized world. And this will open up new export opportunities.

Eastern Europe with bridge function

Those polled believe Eastern Europe will serve as an entry point for exports to the West for some emerging countries. "Chinese or Indian carmakers are likely to use the Eastern European market as a bridge eventually taking them to the Western Europe, while they will focus on Mexico before entering the North American market," Meyer explains.

Carmakers will have to adapt to region-specific wishes of their clients. In developed nations, customers tend to look for smaller, environmentally cleaner vehicles, with demand for compact and sub-compact cars expected to see the strongest rise.

Cars as status symbols

A Mercedes Brabus at the Essen auto show Photo: Roland Weihrauch/dpa +++(c) dpa - Bildfunk+++

Mercedes cars continue to be status symbols for their owners

There will of course be also a certain demand for such cars in emerging countries. "But a bigger growth potential lies in cars that would serve as status symbols, such as SUVs," says Meyer. "That's where we see a difference in developments in emerging and developing countries."

Another hot issue for the industry is the growing importance of mobility services. Three quarters of respondents believe alternatives to the conventional owning of cars, such as car sharing and rent-a-car services, will be making inroads in many regions of the world. More than half the experts assume that cars will increasingly become part of mobility concepts including public transport.

Unbeatable combustion engines?

But the question that is probably hardest to answer at this stage is the one about which motor technology will eventually win out. With the recent hype about electric cars now subduing again, more and more experts believe that over the next five years, more resources will be spent on improving conventional combustion engines.

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