Markets of the countries
The quality of the Tesla cars was the worst
At the end of June, 2020 it became known that Tesla got the worst point among 32 main autobrands in a research of quality J.D. Power. The Tesla cars received the last place because of different problems which owners announced.
The J.D. Power company annually conducts a research quality of cars within which within 90 days it estimates performances of new cars. Products of Tesla were estimated in this research for the first time. As a result at cars and Tesla SUVs 250 problems on 100 vehicles whereas the average indicator on the industry is 166 problems were revealed. The worst indicators also appeared at Land Rover (228), Audi (225), Volvo (210), Mercedes-Benz (202) and Jaguar (190).
In general, in a research of 2020 luxury cars failed because of problems with the information and entertaining systems. However in case of Tesla of a problem included defects of paint, bad landing of panels of a body, luggage carriers which were difficult to be opened and closed too strong noise of wind in salon, scratches and rattles. Generally problems concerned low quality of factory production, researchers consider.
Actually J.D. Power did not include Tesla in the ratings as the car maker did not provide permission to check of the cars in those states where it is required under the law. However J.D. Power said that it collects data from owners of Tesla in other 35 states and this information enough for efficiency evaluation.
Certainly, the initial quality not necessarily means popularity or durability. Many Americans buy cars, being guided by other reasons which include the size, efficiency of use of fuel, the price and the status. For example, Hyundai Genesis was the best luxury brand in a research, but Genesis very much tries to win attention of buyers whereas the popularity of Tesla steadily grows.
The crash of car sale because of COVID-19 pandemic
In China because of COVID-19 pandemic for February, 2020 car sales dropped by 79% in comparison with the same period of last year, in March – for 49%. In France, Spain, Italy, Germany and Great Britain sales of car dealers in March decreased at the rate from 40% to 80% (see the diagram). At the same time, analysts of the company note, world sales volumes of cars will return to pre-crisis level not earlier than the middle of 2021 that is connected mainly with decrease in purchasing power of the population as a result of pandemic crisis.
As technologies turn cars into smartphones
Technology giants turned smartphones and TVs into permanent sources of income. Now the companies want to cooperate with car makers to turn into the smartphone and the car, said in the publication of Reuters of January 9, 2020. Read more here.
Car makers revaluated number of employees and dismiss 80 thousand people
By the beginning of December, 2019 car makers planned reduction in total of 80 thousand jobs on everything. One of the reasons of so mass layoffs is that the companies revaluated the number of the employees necessary for development of electrical and pilotless machines.
Only at the end of 2019 Daimler also Audi announced about 20 thousand jobs reduction, and Nissan dismisses about 12.5 thousand people at the plants worldwide. Nissan stood at the origins of the market of electric cars, but afterwards affairs at Japanese the giant were not taken: profit fell to a 10-year minimum, scandal with arrest of the head burst, and an exit of updated electric vehicle Nissan Leaf was delayed.
Though the most part of the liquidated working positions is concentrated in Germany, the USA and Great Britain, fast-growing economies are also not insured from similar effects, and the auto giants began to reduce business there.
For example, the Chinese producer of the electric vehicles NIO after multi-billion losses and falling of quotations at the exchange in New York announced 20 percent decrease in number of staff by the end of September, 2019 — work was lost by more than 2 thousand employees.
|Permanent deceleration of rates of development of the world markets will affect further profitability and the profit of car makers which already suffered from increase in expenses on research and development in the field of technologies of autonomous driving — the analyst of Bloomberg Intelligence Gillian Davis says. — Many producers of vehicles focused on cost reduction to prevent decrease in a margin.|
As Uber, car-sharing and rolling of electroscooters ruin carmakers
At the end of May, 2019 carmakers faced serious threat — the youth does not wish to buy constantly rising in price cars, giving preference to services of the order of the taxi, car-sharing and rolling of electroscooters.
The marketing director of Ford corporation Joy Falotico held several meetings devoted to a question which can is crucial for the future of the company, to understanding of needs of generation Z (the people born in the late nineties — the beginning of the 2000th years). Fallotiko notes that though the generation Z is still very young, they already have own point of view on different brands. At the same time they grew up on social networks therefore for them everything looks differently.
Detroit tries to return itself young buyers still since baby boomers passed to the Japanese brands after an oil crisis of the 1970th years. To agree with millenials too did not leave – the malotirazhki, released at the beginning of this decade, were unclaimed in the world of cheap and available fuel where the show is run by SUVs. But hardly Detroit carmakers decided to pass from sedans to high-profitable SUVs and trucks, it turned out that the generation Z limited in finance prefers compact cars.
Involvement of young buyers by cheap minicars is the method of formation of loyalty checked by time to a brand which becomes more and more profitable as young consumers mature and begin to buy more and more expensive cars of the same brand. Honda, Toyota and Hyundai still adhere to this strategy, considering that "cars are gate in the industry.
For generation Z cost has much bigger value, than for millenials are the poor students burdened with debts for training who often observed how their parents lost work or fought to make ends meet during Great economic downturn. The new generation is much more conservative in relation to money: two thirds buy used cars, and the majority is selected by compact malotirazhka or sedans of the average size.
However, the generation Z is still far from age of peak earnings, and a lot of things can change. Eventually, millenials originally were considered as avtomobilenenavistnik whereas it turned out that they just saved money for large purchases. And still technology innovations in automobile business can significantly change the relations of carmakers and generation Z. These people will reach the peak of financial wellbeing by 2030 when cars UAVs at last become mass. But also long before it the generation Z can give preference to alternative vehicles, such as Uber and electric scooters. Concerns are afraid that the new generation just will never come for car market.
Car makers are convinced that they will be able to win in this fight if they rely on cars which reflect passion of generation Z to social changes. New cars should be environmentally friendly and be loaded as easily as smartphones. Considering that by 2020 the generation Z will already make 40% of consumers, Detroit has no other choice except how to review sales strategy. As the chairman of North American department of Nissan Jose Louis Valls (José Luis Valls) noted, to car makers it is necessary not only to use new technologies, but also to understand how new clients will behave and to respectively adapt the equipment and services.
The forecast of sales growth in Europe for 1%
According to the forecast of LMC Automotives company, the number of registration of new cars in Europe in 2019 will grow, but not much more – approximately on 1%. Experts of Coface consider that demand for electric vehicles will remain stable for a year, even despite decrease in volume of the government subsidies provided to a segment and the general cooling of world economy. The People's Republic of China becomes more and more attractive market for producers of electric and hybrid cars. Beijing supports this trend using tax benefits, and for 2019 the government is faced by the purpose to bring sales of new electric vehicles to 5% of total sales of a car in a year. Volkswagen already announced plans to bring to the Chinese market of 25 new models of electric vehicles from 2020 to 2025 and to invest in a segment 12 billion dollars through joint ventures.
Car number on 1000 people of the population in the countries of the world
Recession of sales at the end of year for the first time for several decades
In general demand for cars in the world market decreases – possibly, fall of the index of consumer confidence against the background of trade wars and geopolitical tension on the international scene is a basic reason. 2018 became the first for several decades, shown negative dynamics of car sales. The changing landscape of the market forces producers to adapt. In process of toughening of the legislation and competition aggravation corporations should review the plans for expansion of sales for 2019.
In the USA for the first 11 months 2018 of sale of cars dropped by 1%. Negative dynamics was not enveloped back even by growth of sales volume in a segment of low-tonnage cargo cars and pickups (+9.8% in comparison with the same period of previous year). Moreover, Donald Trump already sounded threat to enter import rates on cars and auto parts from a number of the countries that can become serious blow both for foreign producers, and for American – many parts which use carmakers of the USA, are made abroad.
In China car sales as of the end of November of the 2018th slightly decreased (-0.1% of YoY). Experts of Coface consider the reason of negative dynamics cooling of consumer demand and the general deceleration of national economy. Besides, the competition between car makers escalates that forces the enterprises to sacrifice profit for the sake of reduction of prices. It should be noted, however, that owing to reduction of import tariffs of cars from 25% to 15% in the Chinese market it is possible to expect growth of sales volume of a car of foreign brands.
In Western Europe the number of registration of cars grew by 0.8% (as of November of the 2018th). At the same time it is possible to note heterogeneity of dynamics over the countries of the region – for example, in France growth was 4.4%, in Germany – 0.4%, in Spain – 8% whereas in Italy sales dropped by 3.5%, and in Great Britain – for 6.9%. A certain pressure upon the market is put by the new rules of check of cars on compliance to standards of the EU complicating procedures of certification.
In the 2019th deterioration in perspectives of a number of the national markets will have negative effect on the European demand. Coface predicts decrease in growth rates of GDP of the Eurozone from 2.1% in 2018 to 1.8% in the 2019th. In spite of the fact that the average level of unemployment in the region consistently decreases, the consumer confidence index falls (-3.7% for November of the 2018th). Uncertainty around conditions of an exit of Great Britain from the EU also disturbs both consumers, and producers.
Trade wars and decline in demand reduce revenues of car makers worldwide
According to experts of Coface, a situation in the sector of automotive industry as of November, 2018 not the most favorable: level of industry risks of the sector is estimated as average or high in several regional markets (Asia, North America) at once. The situation can shortly change in spite of the fact that in countries of Western Europe the risk level is estimated as low.
In the large markets (EU USA China) in automotive industry keen competition in the field of innovations is observed. Car makers should update a lineup taking into account toughening of the nature protection legislation and to invest heavily in promotion more ecologically safe, but expensive electric cars. As it became obvious in the last several years, violation of regulations on emissions CO2 can turn back serious problems for producers, emphasized in Coface. Under close attention of regulating authorities there were already such giants as, for example Renault SA, Nissan and Daimler. As a result of state control toughening many producers preferred to refuse diesel engines for benefit of petrol, and competition pressure from outside Tesla also forces producers to complement the product portfolios with electric cars or hybrids.
Experts of Coface selected pacing factors of increase in risks in the industry.
The first possible scenario: gain of market segmentation owing to toughening of requirements of the nature protection legislation. Good example of implementation of this scenario — lawsuits between California and the Federal U.S. Government concerning new standards for automobile emissions. California has the special right to set own ecological standards. As the result, the state, important for the American car makers, can set more strict requirements to emissions, than other states (in particular, republican states usually set less strict nature protection regulations) that will result in additional operational difficulties for car makers. Considering that at congressional elections democrats managed to receive the majority in the lower house, it is possible to expect that the situation will only become complicated, consider in Coface.
The second scenario: general deceleration of rates of development of economy. As of November, 2018 car sales grow in Western Europe. So, in 8 months since the beginning of year sales volume in the region grew by 5.1%, having almost reached pre-crisis level. At the same time, however, it is expected that together with slowdown in economic growth of the region (for 2018 GDP gain for 2.2%, in 2019 is predicted — already only for 1.9%) also sales volumes will gradually fall. Deceleration of economy can affect confidence of consumers and push them to pass to savings behavior model, having postponed purchase of new cars until the best times, experts believe.
At last, the third possible scenario: trade wars. The trade conflict between China and the USA leads to increase in prices for raw materials that, in turn, reduces revenues of car makers. So, recently in Ford said that increase in import rates of the USA on steel and aluminum lowered the profit of the company by $1 billion according to specialists of Coface, other car makers too for certain will feel negative effects of growth of duties. In particular, Goldman Sachs predicts that it, for example, of General Motors can also receive less about $1 billion Besides, trade war forces to select producers between increase in prices for the lineup or reduction of the income. Some German producers — for example, BMW and Volkswagen — already selected the second option.