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German and European automotive industry in a state of flux

“The success of German automotive manufacturers (OEM) will, in future, depend not ‘only’ on the market success of the so-called ‘premium vehicles’, but also on the products that they use to compete with the international challengers in countries such as Brazil, Russia, India and China (‘BRIC’).” This is the eminently controversial assessment of the German and European automotive industry with which Rainer Kurek, Managing Partner of Automotive Management Consulting GmbH, has sought to open up debate.

“Because of the increasing market saturation in the triad markets (USA, Europe and Japan), the current challenges faced by European motor vehicle manufacturers will become more acute,” continued Kurek in elaboration of his thesis. Unambiguous data, such as the number of new-car registrations in Germany, which have fallen significantly in spite of positive forecasts from 2000 to the present, provide clear and unambiguous warning signals.

In absolute terms, growth for German manufacturers still in evidence in threshold countries

In absolute terms, growth is supposed to be achieved by German manufacturers in the mid to long term in the so-called ‘threshold countries’ such as Brazil and Russia, as well as in the oft quoted ‘tigers’, India and China. Kurek: “That’s where international automotive business will be decided in the future.” The German automotive industry is still seen as the world’s master of exports in the ‘BRIC’ countries. “These basic conditions do not, however, have to remain as they are in the long term,” warns the sector expert. And, according to a further assessment by Kurek, who is a specialist in the automotive market, the challengers from the Far East, in Japan and Korea, following the USA, are set to conquer yet more international markets. Europe will, in future, he suggests, also become a target market for producers in these countries, as the market represents a ‘mature sector’. Kurek adds: “The fact is that sales by Far-Eastern manufacturers in Western and Central Europe continue to grow, whilst the sales of automotive manufacturers from here remain stagnant as far as several different vehicle types are concerned.”

Automotive strategists in favour of a ‘vehicle for the world market’ have come to grief.

Against this background, it is more important than ever to offer regional variety in consumer-oriented services. Kurek continues: “The great strategists in favour of so-called ‘vehicles for the world market’ have come to grief. Individualisation, to cater for the end-customer’s specific needs, is becoming a key factor of success in the sector.” And he cites a number of examples of products; he is convinced, to this day, by the success story of the Dacia Logan, which represents a “relatively low level of quality” but at a “relatively low price”. Kurek continues: “The product has a very well-balanced, indeed positive number of benefits for the customer and has become a success worldwide, as a result.” With comparable local products, the ‘relative quality’ may well sometimes be higher, but so, too, is the price. The crucial question is whether the ‘relative price’ also represents good value for money in the eyes of the end consumer in the threshold countries. Kurek adds: “In this sense, the Dacia Logan is one of the most innovative products in the world, since it continues to offer positive customer benefits to this day.”

‘Relative quality’ and ‘relative price’ are the decisive factors in international competition

Our expert’s arguments resolutely contradict the broadly accepted assumptions in the sector, suggesting that ‘cheap cars’ are not a profitable segment for German manufacturers or that the cost structures that pertain in this part of the world do not allow anyone to bring a comparable product onto the market, etc. Kurek again: “If we want to continue to be successful in threshold and developing countries with their markets of tomorrow, then we shall have to adapt to the current challenges posed by notions of ‘relative quality’ and ‘relative price’.” For even in the so-called ‘premium segment’, OEMs will, at some stage, inevitably again come up against saturated markets in those threshold countries.

An established specialist in the sector, Kurek sees excellent opportunities for radical innovation in the German automotive industry, with regard to low-energy, low-emission vehicles, an opportunity to open up a ‘new game’ and thus to meet pro-actively the diminishing demand in the so-called triad market of the USA, Europe and Japan. In doing so they must follow a multiple-strategy approach by, on the one hand, engaging in consistent development of existing propulsion systems like the petrol and diesel engine and, on the other hand, by developing alternative concepts like electro-mobility.

The core challenge, says Kurek, lies in integrated lightweight automotive construction. Against the background of an ever more fragile energy supply and constantly growing, ever more ambitious environmental demands, the automotive industry worldwide is faced with the predominant task of contributing to the conservation of primary energy resources, through vehicles that optimise fuel consumption and exhaust emissions. The energy footprint of the low-energy, low-emissions vehicles of the future will depend, above all, on effective and systematic lightweight construction – and that is equally true for conventional motor vehicle concepts, hybrid propulsion systems and electric vehicles.