(Financial Times) — China is poised to produce more cars than Europe in 2013 for the first time, hitting a landmark in the country’s rise in the automobile industry and underlining the difficulties for the European vehicle sector as it faces a challenging 12 months.
China is in 2013 set to make 19.6m cars and other light vehicles such as small trucks compared with 18.3m in Europe, according to projections prepared for the Financial Times by five forecasting groups.
The rise of China is even more striking considering the projections for Europe include not just the European Union but other nations such as Russia and Turkey.
In 2012, on the basis of motor industry estimates, Europe made 18.9m cars and related vehicles, comfortably ahead of China’s tally of 17.8m.
The projections are based on data from the IHS, LMC Auto and PwC consultancies together with investment banks UBS and Credit Suisse. They paint a picture of only a slight recovery in 2013 for the world car industry, where output is expected to climb by a muted 2.2 per cent in the coming year, as against 4.9 per cent in 2012.
With global sales valued at about $1.3tn a year, the car industry is one of the best bellwethers of world economic conditions.
According to the data, Europe will in 2013 make just over a fifth of the world’s cars — a figure that is well down on the 35 per cent it recorded in 2001. In 1970 nearly one in every two cars made in the world originated from a factory in Europe — which is generally recognised as the place where the global auto industry began with the unveiling of a rudimentary three-wheeler in 1885 by the German inventor Karl Benz.
Car production in China in 2013 is likely to be 10 times higher than in 2000 — when its share of global auto manufacturing was just 3.5 per cent as opposed to a likely 23.8 per cent in 2013.
Scott Corwin, an automotive expert at the Booz & Co consultancy, said that even with relatively strong growth projected in vehicle output and demand in both the US and China, “these markets alone won’t do much to pull [the whole world] forward”.
Mr Corwin also cautioned that even with a continuation of the recent rise of the car industry in China, many vehicle markers doing business there “are struggling to make much money” as a result of tough competition and the fact that the market is made up of large numbers of small cars, for which profit margins for manufacturers are small.
Europe’s expected fall in production is in response to a steep decline in car sales throughout the continent since the 2008/09 financial crisis, with the problems causing severe difficulties at a number of large vehicle makers, notably France’s PSA Peugeot Citroën, which is cutting almost 10,000 jobs and is lining up a €7bn rescue package for its financing arm with the French government.
Most car markers with strong positions in the European vehicle business are braced for a turbulent period ahead. Norbert Reithofer, chief executive of the German luxury carmaker BMW, said he expected conditions for selling cars in Europe would remain “very challenging” in 2013. Håkan Samuelsson, chief executive of Volvo Cars of Sweden, said: “[As for] the [European car ] market, you can only pray.”