'Decade of the Germans'

German automakers are enjoying a great year as car production, headcount and market share are on the rise at home and abroad. The forward momentum comes just as the German auto industry association (VDA) is readying to host the world's biggest automotive show, the Frankfurt auto show. VDA President Matthias Wissmann recently met with Automotive News Europe Editor-in-Chief Harald Hamprecht in Berlin to talk about what he expects for the rest of the year.

The IAA is certainly the high point of 2011 from an automotive standpoint. Even before the crisis two years ago, it had expanded its position as the most important mobility fair worldwide. We expect more than 900,000 visitors and about 900 exhibitors from western and eastern Europe, Asia and North and South America. In 2009, it was just 781 exhibitors from 30 countries. The space will grow to 210,000 square meters, up 15,000. And we have a few returnees among the international automakers.

Japanese automakers that weren't there in 2009, such as Honda and Mitsubishi, will be exhibiting again. Cadillac and Chevrolet, which canceled their participation in 2009, and SsangYong will once again be represented. China's Changan and Infiniti from Japan will be represented at the IAA for the first time.

There will be more than 300, pushing us above the level seen in 2009. Schaeffler, Faurecia and Woco are new exhibitors. Behr, Bertrandt, Brembo, Continental, Delphi, Denso, Dometic Waeco, Hankook, Isringhausen, JTekt, Peiker, Plastic Omnium and Tenneco are back with their own stands. Chinese suppliers Foryou General, Zhejiang Sanhua Automobile and Ningbo Joyson Automotive are also coming.

The IAA is the mobility fair with the greatest media response globally. We expect more than 10,000 journalists from within Germany and from abroad. There are more than 80 press conferences on the two press days. The new models that will be visible for the first time at the IAA will naturally have a positive effect. As our surveys continue to show, a large portion of the visitors come to Frankfurt because they intend to buy a new car in the six months after the IAA. And as far as production and exports go, the German auto industry is enjoying the best year in its history.

The German domestic car market is on a stable course. For the entire year, we expect 3.1 million units. To achieve this goal, an overall market growth of 2 percent is necessary in the second half of the year.

In Germany, we expect between 3.1 million and 3.2 million new registrations in the medium term. Western Europe remains a stable market with a large volume. In 2010, new-car registrations were just under 13 million units. For the entire year, we expect a level of about 13 million new registrations. In the medium term, we expect further recovery and slight growth.

Not this year and not in 2012. But in the medium term, Russia certainly has the potential for this. But Russia revealed itself to be very vulnerable in the crisis. Its decline was one of the most severe worldwide.

Indeed. The auto-cost index has risen more than 4 percent since the start of the year. New-car prices remain stable, in contrast to fuel prices, which have shot up 11 percent. What's needed is a calming of prices at the pump. There are challenges globally as well in the general conditions for the entire industry.

Higher energy and raw material prices are tough on companies. Mid-sized companies that process metals, rubber, plastics or paints are especially affected. With the crisis behind them, suppliers and manufacturers need planning certainty again and long-term contracts with their raw material suppliers as well as secure and affordable energy, in view of the intense international competition among different locations.

In the first half of the year, German manufacturers built nearly 3 million cars domestically, an increase of 5 percent. German automakers are utilizing 89 percent of their capacity, compared with 84 percent last year. Suppliers are at 84 percent, up from 76 percent for the same period last year.

The growth dynamic for domestic car production will slow somewhat over the course of the year, although it will remain at a high level. For all of 2011, we expect a domestic production volume of more than 5.9 million cars. That would top the current record of 5.7 million set in 2007.

Car production by German companies stood at 11.6 million cars in 2010, including more than 5.5 million units domestically and a little more than 6.1 million abroad.

In all, we expect German manufacturers' production in 2011, in Germany and abroad, to reach 12.5 million cars. About half of that volume, 5.9 million units, will be manufactured domestically. And globally, we can expect a market share of about 20 percent for our manufacturers.

In 2012, we expect a global market of more than 70 million cars. And we are assuming that German manufacturers will continue to gain importance due to their quality and innovative strength. There is, therefore, every indication that this will be the decade of the Germans.

In the first half of the year, we boosted exports by 6 percent to 2.3 million cars. That's a new record. Incoming orders from abroad were up 13 percent for the first six months of the year. Our export prediction for 2011 is more than 4.5 million cars, and that would be another all-time high.

Our export share in the euro zone has been stable at 32 percent, while exports to the rest of Europe have risen one-fifth to 31 percent. About 15 percent of our car exports go to North America, and this share has increased as well. About 11 percent of our cars are exported to China, and another 11 percent to the rest of the world. In both cases we have been able to increase our exports.

The market share for German brands stands at more than 47 percent in western Europe. That means that nearly one new car in two sold in western Europe comes from a German company. While we are pleased about our gains in developing countries, western Europe remains our home market. This market, where demand will be just under 13 million cars this year, continues to be a stable anchor for our industry.

In western Europe, the Germans, including German-controlled brands such as Seat and Skoda within the VW Group, are clearly No. 1 with a market share of more than 47 percent (through May 2011). Moreover, the UK and Spain each are at 52 percent. In Germany itself, the figure is 70 percent.

In the United States, German brands had a market share of more than 11 percent. In China and Brazil it stood at about one-fifth. The figure was 16 percent in Russia and more than 5 percent and trending upward in India. In Japan, German brands made up about 80 percent of all car imports. However, at 4.6 percent, the share of imports from all brands is still comparatively low when compared to the total number of registrations. To put it in a catchy way, every fifth new car registered in China or Brazil is a German-company brand. Every seventh new light vehicle registered in Russia is a German-company brand. And every eighth new car sold in the U.S.

In 2011, the Chinese car market ought to grow by at least 8 percent to 12.2 million units, and we as the German auto industry must be in the forefront there. The market share of German brands has risen in China for the third year in a row, recently to 21 percent. But we are not betting everything on one card. Instead we are well positioned globally.

In the U.S., German manufacturers are growing faster than the market, and that has been the case for seven years in a row. In the first half of 2011, they increased sales of light vehicles (cars and light trucks) by more than 17 percent to about 490,000 units, while the overall market grew nearly 13 percent. Our market share was at 11.3 percent. German manufacturers made the right decision strategically, mainly building crossover utility vehicles at their North American factories. With the new VW factory in Chattanooga, we are now going into the high-volume car market as well.

Diesel new-car registrations are rising more quickly than the market. The market share has increased by 0.3 percentage points to 2.3 percent through April. And the market share of German brands in the diesel car segment stands at 100 percent. If you include light trucks, then every third diesel light vehicle sold in the U.S. belongs to a German company brand. We are happy that the U.S. government has also recognized the benefits of clean diesel. U.S. Transportation Secretary Ray LaHood clearly expressed this in May 2011 when he said the U.S. could save 1.4 million barrels of oil a day if one-third of all cars were equipped with a clean diesel. In general, the German auto industry has a clear goal in mind, especially in the U.S., that is to offer the most efficient car in every segment.

We Germans are drivers of innovation. Not least of all, this is due to fact that the leading, figures in the companies are primarily engineers with a long-term, entrepreneurial vision. So even during the crisis, expenditures for research and development were kept at a high level.

About 20 billion euros a year. Another important indicator of the innovative power of the auto industry is the amount of CO2 emissions in grams per every kilometer that a car is driven: the lower the CO2 value, the lower fuel consumption, and the more efficient the overall product.

We have to differentiate. It is well known that the German brands have more vehicles in the upper segments. And we are nonetheless just 0.8 grams from the average value (147.2 g/km). In the first five months of this year, the average CO2 value for German company brands newly registered in Germany was just 148.0g/km. That's a decline of 4.2 percent compared with the figure for the previous year. By contrast, import brands were only able to reduce the CO2 value of their new registrations by 2.9 percent.

Here it again makes sense to take a closer look. In 10 out of 10 vehicle segments, from the smallest city car across the midrange all the way to the family van, German manufacturers on average have a lower CO2 value than the imports for newly registered cars in Germany. Those are the official figures from the Federal Motor Transport Authority. In five segments, we even have the CO2 champion, meaning the model with the lowest CO2 value. The number of low emission cars from German manufacturers is growing significantly year after year. In the meantime, customers can choose from among 340 models from German company brands with a CO2 value of 130g/km or less. Incidentally, the number of these vehicles has increased sevenfold since 2007. The drivers for this trend are lightweight body construction, energy-saving components in chassis, engines and transmissions as well as the development of alternative drive systems.

It doesn't matter who starts out first. It's who arrives at the destination ahead of the rest. The German auto manufacturers, particularly with the electric car, have high standards for quality, reliability, range and safety. That's why they are reaching the market with tried-and-tested technologies. Besides, we shouldn't get carried away over the electric motor.

Precisely. Even if about 1 million electric vehicles are driven on German roads in 2020, that is just 2 percent of the overall stock of vehicles. Even in the coming years, the internal combustion engine will be the dominant powertrain. If conventional drives can achieve CO2 savings of another 25 percent by the end of the decade, that is a substantial contribution to the protection of the climate.

According to figures from the federal statistical office, core employment in the German auto industry rose to 718,100 employees in early summer, up nearly 13,000 employees compared with the previous year. Manufacturers accounted for about 401,000 employees, and suppliers more than 287,000. Globalization promotes and secures employment in Germany. From the middle of the 1990s to 2008, thus before the crisis, the number of core employees rose by about 100,000.

The need for highly qualified employees is growing. In the last 10 years, the number of staff with university degrees has doubled to 100,000. Alternative drives offer new opportunities, especially in the areas of electrochemistry, sensors and electronics. The National Platform for Electromobility puts the additional employment effect associated with the run-up to electric cars at 30,000 jobs in Germany by 2020.

The agreement with South Korea is indeed a distortion of competition; but it hasn't thrown us off track. Open markets are crucially important for the German auto industry since three out of every four cars built in Germany are exported. Trade barriers such as high duties or other obstacles to imports lead in the long term to the transfer of manufacturing abroad. The European Union is currently in talks with India on a free trade agreement, but the negotiations are turning out to be extremely complex, especially for the auto industry.

The Indian side is aiming for far-reaching exceptions to duty reductions on products from the auto industry. At the same time, India's automotive trade surplus with the EU is already more than 1.1 billion euros. The import value of cars in the EU that were manufactured in India was 1.26 billion euros, or eight times higher than the value EU's exports to India (0.16 billion euros). It's now become apparent that the leaders of the EU's negotiations are moving away from the goal of a broad market opening and are ready for substantial concessions. That should be avoided in any case. A bad deal will have an effect on coming deals, with important trading partners such as the ASEAN states or on the ongoing negotiations with Mercosur in and Latin America.