Monday , June 14 2021

Cars do not smell more Europeans

The automotive industry is in a crisis. Is it just a matter of normalizing the market after several years of high growth, or are there problems that will affect Slovenian suppliers in the automotive industry?

There is something in Europe and the United States that we have not seen from the crisis. Many people just stopped buying new cars. Volkswagen recently announced that it sold 10.83 million cars last year, a slight rise over 2017, but this is a poor consolation for the giant who suffered a two-month drop in sales of new vehicles in the last months of last year.

In September, sales of new Volkswagen vehicles dropped 48 percent year-over-year, in October by 21.5 percent, and in November and December by 10.9 percent and 8.7 percent, respectively. Buyers in the developed world are increasingly retained, especially in Europe, where the number of new cars registered last year fell by 23.5 percent in the same period last year, according to the European Association of Car Manufacturers (ACEA). In October, the decline was 7.3%, November 8% and December 8.4%. From September to December last year, 610,000 cars were sold in comparison to the same month in 2017. For comparison: in Belgium last year, 550,000 cars were sold during the year, while fewer than 73,000 cars were sold in Slovenia.
"Any change in the peak" also reflects on the supply chain, but with a certain time lag, "said Primož Bešter, a member of the Managing Board of the Collector Group, adding," The negative consequence of delay is that it often does not react in the chain of supply fast enough ".

But the reason for the surge is not (yet) not. For example, Spark Mechanisms did not notice a drop in orders at all, while others thought it should have come to that.
After the crisis and the radical decline in car sales in the period from 2008 to 2014, strong sales growth was expected in the next three to four years, and by the middle of last year, in practice, they have already exceeded pre-crisis levels, analyzed the situation of the market in Hidria in Idria and estimates that a slight decline in sales is currently expected.

The drop in sales of diesel was 18.3%, while "gasoline" sold about one million or 12.8% more than in 2017.

"The question is whether there is a prediction of large drops or a certain market stabilization, which is still high." According to our information, the second, according to the group, which last year generated revenues of 275 million euros, is one tenth more from the previous year. With uncertainty on the market, they remain cautious in the forecast for this year: "Due to the planned gradual slowdown in growth, we expect approximately the same sales volume as last year, that is, about 280 million euros," they wrote in their answers to the Council of capital.
And how is the cooling of the automotive market, which is reflected in lower orders as lower sales, influenced the suppliers of Slovenia in the automotive industry? In Dell we have already announced that the orders were at its lowest level after 2016. "The automotive industry works according to the principle of the so-called" just-in-time "reserves. Therefore, reduced car sales are felt right in the supply chain," Hidria said, adding that the resulting market situation is already reflected in the status of current orders. "It's up to five percent lower levels," they admitted in the Idrija group. A few drops in orders are expected in Collector Group, which last year generated revenues of 406m euros in automotive industry contracts (22% more than in 2017), Bechtter reported. "Assuming everything is stable, we expect about 410m euros this year," he continued. But the fact is that the market situation is not currently quite stable. "In the first quarter we see a significant adjustment, even up to minus 15 percent in the individual components of the business class of components and mobility systems," he said, adding, "I can only hope the trend will appear and we can we finish the business year as part of the plans. "But, of course, hope is not enough. "In the Collector, we are already preparing adjustment measures," Bester noted, estimating that Collector has some advantages in this area, as it can quickly detect the market cooling due to its position in the value chain.

REUTERS Emanuel Macron and Angela Merkel.

The key question is how much the car market can cool down and which events can speed up cooling? "The global risks from the perspective of trade wars, which obviously become a new reality, have no effect on the automotive industry, because they increase the uncertainty of final consumers," Bester explains, and continues with the uncertainty of demand reduction.

Primož Bešter, Member of the Managing Board Kolektor Group: The global risks from the aspect of trade wars, which obviously become a new reality, do not affect the automotive industry, as they increase the uncertainty for the final consumers.

In this context, he points out that at the moment there are very high prices of raw materials, that the market is overheated in relation to other costs that arise in the process. As an additional risk, he highlighted the decline in consumption in China, affecting related global chains.
But we add to the risks, for example, especially if it is uncontrollable, which will further offset the German economy, which is already flirting with the recession. Researchers at the Halle Institute for Economic Research, for example, found that chaos after the breach would have the biggest negative impact on the German automotive industry. It is expected that more than 15,000 jobs in the German automotive industry will be endangered, with a total of around 100,000 jobs. The implementation of the black scenario would also have negative consequences for the suppliers of the automotive industry in Slovenia, largely tied to German producers.

REUTERS Donald Trump, Xi Jinping, Angela Merkel, Mauricio Macri and Malcolm Turnbull at the G20 in Hamburg.

For Slovenian suppliers, the structure of new car purchases is also important. Last year, 8.5 million new cars with gasoline engines were sold in the EU, and only 5.4 million diesel engines were selected, with more than 6.6 million European consumers lasting one year earlier. The drop in sales of diesel was 18.3%, while "gasoline" sold about one million or 12.8% more than in 2017.
The consequences for Slovenian companies that have installed parts of diesel engines can be catastrophic. Fortunately, according to Tanja Mohoric, director of the ACS Cluster, this is not so much. "Slovenian suppliers are not only tied to diesel vehicles, most components or systems are sold both for petrol vehicles or for hybrid and electric vehicles (seats, actuators, lighting …)," she said and confirmed that the sale of members of the ACS, which falls exclusively on components for internal combustion engines, is difficult to estimate because there are no data on the concluded supply contracts for individual components.
The drop in the diesel engine is quickly released from opportunities in other areas. "Sales of solutions for hybrid and electric vehicles are rapidly increasing," Hydra said.

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