Coface Panorama Sectors Autumn 2013 - Carmakers : Europe refocusing on emerging markets
This Panorama includes our global sector barometer, which analyses the situation in fourteen key economic sectors in three of the world‘s major regions (European Union, North America and Emerging Asia) through a single credit risk indicator. In Europe, sector risks continue to deteriorate, especially in chemicals due to the remaining difficulties in the European industry, and also in the pharmaceutical branch due to the fiscal tightening measures taken by the governments.
This Panorama also contains our study on the refocusing of European carmakers on emerging countries through two key emerging markets, Russia and Turkey.
Turkey’s automotive sector, more seen as a re-export hub, will have to face the competition of low cost countries in a near future as the current effort in R&D is insufficient.
A growing domestic market makes Russia very attractive for European car manufacturers and the country tries to preserve its own automotive industry through creeping protectionism.
For both cases, the emerging middle classes remain a powerful driver.
However, governments are heavily orienting the fate of these industries, by capturing a bigger share of the added value. This is a required condition for a long term success.
Despite the end of the recession in the euro zone, sector risks continue to worsen in Southern Europe. There has also been a slight deterioration in credit risk in emerging Asia.
THE CAR INDUSTRY WORLDWIDE
The car industry is the world’s 6th largest economic power by GDP equivalent with revenue of 2,000 billion. By 2018, the estimated average growth rate for the sector will be 5.6%, supported by the development of the car fleet in emerging countries, reflecting a shift in production and sales to higher growth regions. China accounted for 20% of global sales and 23% of production in 2012.
THE REFOCUSING OF EUROPEAN CARMAKERS ON EMERGING COUNTRIES : A BOLD BET ? THE RUSSIAN AND TURKISH CASES
The European car sector has suffered considerably from the prolonged crisis in the euro zone. It has been affected both by structurally high production costs and the lack of demand on its domestic market. In this environment, the sector’s international groups are being prompted to turn more towards the emerging markets. The examples of Russia and Turkey illustrate this trend : the Turkish market is particularly attracting players wishing to benefit from lower production costs than in Western Europe, while Russia has the advantage of a large internal market (the foremost in Europe by size).