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Promotional material published by B. Metzler seel. Sohn & Co. KGaA - 1.10.2019

The German auto industry should soon be able to put the mega-crisis behind it

“The mood in the industry is bad,” says Jürgen Pieper, Director of Research and Senior Advisor at Metzler Capital Markets, of the German auto industry. A massive drop in demand in China and strong political headwinds have triggered a record-breaking wave of profit warnings in 2019. The climate change debate is also increasing pressure on the auto industry. SUVs, for example, are currently undergoing a massive image transformation, shifting away from the stylish, practical family car to the irresponsible CO2 slinger. In its climate package adopted on September 20, the German government decided, among other things, to impose a CO2 price tag on fossil fuels like diesel and petrol, thus making it more expensive to operate a car – and dieselgate is not even over yet.

All signs are therefore pointing to a crisis, or rather a mega-crisis. This became apparent at this year's International Motor Show in Frankfurt/Main, which was accompanied by numerous protests and demonstrations by climate change activists. The number of visitors also dropped, as did the number of international exhibitors. Nevertheless, Pieper does not believe the German auto industry will remain a crisis industry in the long term. “As early as 2020, I expect a mood of optimism among OEMs and suppliers. Both electric cars and hybrid vehicles will then forge ahead.”  Years of rising investments in further developments should lead to a boost in innovation. “In the medium term, high-quality, well-managed and soundly financed OEMs and suppliers are good investments,” Pieper is convinced. Despite the far-reaching crisis in the global auto industry, Pieper sees encouraging signs for 2020/21.

  • In North America, demand for cars should pick up in 2020, which is an election year in the US. 
  • In China, the world’s most important auto market, demand should at least stabilize as the market is still far from saturated. 
  • Alongside battery-driven electric cars, hybrids will probably make a breakthrough in the coming years. In view of their complex drive technology, this will boost the prospects of many suppliers.
  • A phase of very significantly increasing R&D expenses in the industry lasting several years is gradually coming to an end. New technologies are reaching market maturity, so cost pressure should decline considerably from 2020 onwards.
  • Many companies in the sector have introduced efficiency programs to counter the crisis that should bear fruit from 2020 onwards. In addition, there have been a comparatively large number of changes at board level, providing opportunities for a promising repositioning.

We would be glad to send additional press material upon request to any interested journalist who was unable to attend the press workshop.


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