Auto Industry Cyclicality

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Forum Discussion: https://forum.investmentwiki.org/t/automotive-industry-cyclicality/316/2

The auto industry is also known to be cyclical, as car purchases can be easily delayed when households and businesses are short of cash. Figure 2 shows that the industry typically experiences greater volatility during recessions than real GDP. On average, real motor vehicle output has fallen nearly 12 times more than real GDP during downturns.[1]

https://www2.deloitte.com/us/en/insights/economy/spotlight/automobile-impact-us-economy.html

Factors:

  • Demand Fluctuations: Consumer appetite for cars is directly tied to economic conditions. During times of prosperity, wallets loosen, boosting car sales. Conversely, recessions tighten belts, leading to fewer purchases and shrinking profits for automakers.[2]
  • High Entry Costs: Building cars is expensive, requiring significant capital investments in production facilities, research and development, and inventory. This inflexibility makes it difficult for automakers to quickly adjust to shifting demand, exacerbating the cycle.
  • Long Product Life Cycles: Cars are not instant-noodles; they take months to develop and manufacture. This extended lead time means companies are at the mercy of future economic forecasts, potentially overproducing during upswings and facing oversupply during downturns.
  • Debt Burden: To fuel growth and technological advancements, automakers often carry substantial debt. When sales plummet, servicing this debt becomes a major challenge, further hindering recovery.
  • Global Interconnectedness: The auto industry is a tangled web of interconnected suppliers and markets. A slowdown in one region can ripple through the entire system, causing widespread disruption and amplifying the cyclical swings.

2008 Recession

https://www.researchgate.net/publication/260164730_The_impact_of_the_2008-2009_crisis_on_the_automotive_industry_Global_trends_and_firm-level_effects_in_Central_Europe


https://core.ac.uk/download/pdf/230661682.pdf

Production

In the reporting period, global automotive production decreased by 13.2% to 60.0 million units, of which 49.4 million were passenger cars (–14.0%).[3]

By Geography

Region[4] 2007 2008 % CHANGE 2007-2008 2009 % CHANGE 2008-2009 2010 % change 2009-2010
EUROPE 22,852,578 21,777,794 -4.7% 17,057,293 -21.7% 19,794,758 +16.0%
- EUROPEAN UNION 27 countries 19,724,773 18,439,079 -6.6% 15,289,992 -17.1% 17,078,825 +11.7%
- EUROPEAN UNION 15 countries 16,691,210 15,174,690 -9.1% 12,242,621 -19.3% 13,797,321 +12.7%
BELGIUM 834,403 724,498 -13.2% 537,354 -25.8% 555,302 +3.3%
FRANCE 3,015,854 2,568,978 -14.8% 2,047,693 -20.3% 2,229,421 +8.9%
GERMANY(1) 6,213,460 6,045,730 -2.8% 5,209,857 -13.8% 5,905,985 +13.4%
ITALY 1,284,312 1,023,774 -20.3% 843,239 -17.6% 838,186 -0.6%
SPAIN 2,889,703 2,541,644 -12.0% 2,170,078 -14.6% 2,387,900 +10.0%
UNITED KINGDOM 1,750,253 1,649,515 -5.8% 1,090,139 -33.9% 1,393,463 +27.8%
- EUROPEAN UNION New Members 3,033,563 3,264,389 +7.5% 3,047,371 -6.6% 3,281,504 +7.7%
CZECH REPUBLIC 937,648 946,567 +0.9% 983,243 +3.9% 1,076,384 +9.5%
POLAND 792,703 952,840 +20.0% 878,998 -7.7% 869,474 -1.1%
- OTHER EUROPE 2,028,392 2,191,605 +8.0% 897,696 -59.0% 1,621,376 +80.6%
CIS 2,018,489 2,179,977 +8.0% 880,958 -59.6% 1,606,176 +82.3%
RUSSIA 1,660,120 1,790,301 +7.8% 725,012 -59.5% 1,403,244 +93.5%
TURKEY 1,099,413 1,147,110 +4.3% 869,605 -24.2% 1,094,557 +25.9%
AMERICA 19,154,059 16,858,889 -11.7% 12,531,425 -25.7% 16,343,430 +30.4%
- NAFTA 15,454,764 12,922,326 -16.1% 8,760,965 -32.2% 12,153,564 +38.7%
CANADA 2,578,790 2,082,241 -19.4% 1,490,482 -28.4% 2,068,189 +38.8%
MEXICO 2,095,245 2,167,944 +4.6% 1,561,052 -28.0% 2,342,282 +50.0%
USA 10,780,729 8,672,141 -19.3% 5,709,431 -34.2% 7,743,093 +35.6%
- SOUTH AMERICA 3,699,295 3,936,563 +6.6% 3,770,460 -4.2% 4,189,866 +11.1%
ARGENTINA 544,647 596,745 +9.6% 512,924 -14.0% 716,540 +39.7%
BRAZIL 2,977,150 3,215,976 +8.2% 3,182,923 -1.0% 3,381,728 +6.2%
ASIA-OCEANIA 30,714,858 31,507,000 +1.8% 31,760,155 +0.8% 40,930,255 +28.9%
CHINA 8,882,456 9,299,180 +5.2% 13,790,994 +48.3% 18,264,761 +32.4%
INDIA 2,253,729 2,332,328 +2.7% 2,641,550 +13.3% 3,557,073 +34.7%
IRAN 997,240 1,273,781 +5.4% 1,394,075 +9.4% 1,599,454 +14.7%
JAPAN 11,596,327 11,575,644 -0.3% 7,934,057 -31.5% 9,628,920 +21.4%
SOUTH KOREA 4,086,308 3,826,682 -6.8% 3,512,926 -8.2% 4,271,741 +21.6%
THAILAND 1,287,346 1,393,742 +8.3% 999,378 -28.3% 1,644,513 +64.6%
AFRICA 544,566 586,013 +7.0% 413,451 -29.4% 515,076 +24.6%
SOUTH AFRICA 534,490 562,965 +5.3% 373,923 -33.6% 472,049 +26.2%
TOTAL 73,266,061 70,729,696 -3.7% 61,762,324 -12.7% 77,583,519 +25.6%


https://www.oica.net/category/production-statistics/2008-statistics/

Sales

In 2009, global passenger car sales fell by 6.0% to 52.4 million vehicles. Unit sales largely stabilized in the last months of the reporting period, mainly as a result of government programs to promote sales and lucrative incentive packages from the manufacturers. [5]

  • The Asia-Pacific region, due to the sharp increase in new pas- senger car registrations in China, and Western Europe, mainly due to the strong growth in Germany, were the only regions to record greater demand. . By contrast, the markets in Central and Eastern Europe, North America and South Africa recorded sharp declines.

US

  • Spike in August 2009 sales was due to the Cash for Clunkers program. The US government’s incentive program was only able to ensure stability for a short time.
[6]
  • As seen in the figure below, the percentage of individuals reporting that the concurrent quarter was a bad time to buy a car spikes around the time of the auto sales collapse.[7]
  • There is an overwhelming increase in the percentage that chose economic conditions. The percentage choosing the other answer stayed relatively flat.
  • Widely experienced negative shock to permanent income is a strong candidate explanation for the collapse. The explanation is consistent with the permanent income hypothesis adapted to include infrequent, discrete durable goods purchases. House price declines, on the other hand, explain only a small part of the auto sales decline.
  • A related explanation for the decline in auto sales is the increase in uncertainty that many researchers have associated with the last recession. Bloom (2009) presents a model where irreversible investment in durable goods causes an increase in uncertainty to reduce purchases of durables. We note that a new vehicle purchase exhibits an aspect of irreversibility, because the resale value of a newly bought new auto falls dramatically immediately after being acquired.[8]
https://www.stlouisfed.org/on-the-economy/2019/may/bigger-cause-2008-auto-sales-collapse-credit-conditions-economic-concerns
https://www.stlouisfed.org/on-the-economy/2019/may/bigger-cause-2008-auto-sales-collapse-credit-conditions-economic-concerns
Cash for Clunkers Program

The program consisted of government payments to car dealers of $3,500 to $4,500 for every older less fuel efficient vehicle traded in by consumers that purchased a newer more fuel efficient vehicle.

  • Program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended[9]
  • The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
  • Indeed, over the seven months following the end of the CARS program in late August, the sales pace has averaged 10.7 million units at an annual rate, much higher than the 9.6 million pace in the three months that preceded the program, and considerably stronger than the forecasts made by private forecasters just before enactment of the CARS program.[10]
Date[11] Total Vehicle Sales
Units/Seasonality Millions of Units SAAR Y/Y
2015-01-01 17.857 5.93
2014-01-01 16.858 6.15
2013-01-01 15.882 7.45
2012-01-01 14.781 13.27
2011-01-01 13.049 10.85
2010-01-01 11.772 11.04
2009-01-01 10.601 -21.43
2008-01-01 13.493 -18.04
2007-01-01 16.462 -3.44
2006-01-01 17.049 -2.28
2005-01-01 17.446 0.87
2004-01-01 17.296 1.94

Europe

  • Demand for new vehicles in Western Europe rose slightly in the reporting period by 0.5% to 13.7 million units. At the beginning of the year, a dramatic market downturn was looming; however, this was avoided by government measures to promote sales by most automobile-producing countries in the region. The share of diesel vehicles in Western Europe fell to approximately 46% mainly as a result of the shift in demand to the mini and small car segments.[12]
  • New car registrations collapsed in Central and Eastern Europe.
  • Demand for passenger cars in Germany increased by 18.2% in fiscal year 2009 to 4.0 million vehicles. The passenger car market reached its highest level since 1992 with 3.8 mil- lion units sold (+23.2%), mainly due to the scrappingpremium. In contrast, new registrations of commercial vehicles, at 242 thousand (–27.7%), fell to their lowest level since reunification as a result of a decline in investment activity.
  • German luxury auto makers BMW and Daimler saw sales slip more than other car companies last year as government cash-for-clunkers programs helped overall sales slow by just 1.6 percent from 2008.[13]
  • It said fleet renewal programs in major markets, especially Germany, helped sales pick up in the final six months of the year following a sharp slump in the first half.
  • However, the payments to car buyers encouraged sales of smaller, lighter and more fuel-efficient cars, helping Italy's Fiat Group SpA grow sales by 6.3 percent, France's Renault SA by 3.9 percent and Volkswagen AG — Europe's biggest car maker — by 0.7 percent. Heavier and more expensive models suffered. BMW's sales were down 13.6 percent and Daimler by 13 percent.
European Scrapping Schemes for Vehicles Stimulus
  • The 'typical' scheme required the scrapping of a vehicle with a minimum age of 10 years, and provided an incentive of €1,500 for the purchase of a new car. In total, scrapping schemes have cost European governments €7.9 billion in outlay plus the cost of administration.[14]
  • The €7.9 billion of funding from the 2009 scrapping schemes would theoretically support a maximum of 4.44 million units over the schedule period. Of this, 4.1 million new passenger cars were actually incentivised during the 2009 calendar year, leaving a spill-over volume of 355,000 units for 2010. Not all of this was net additional demand; the study methodology generates an estimated 2.16 million incremental new car sales generated during the year.
  • Vehicle assembly volumes on aggregate responded to the stimulus (in the midst of the sharpest and largest contraction in output ever witnessed) to the extent that we believe their response potentially forestalled, if not eventually prevented, the loss of up to 120,000 direct jobs in the industry.
  • In the absence of European scrapping schemes, we predict that light vehicle production would have fallen by an additional two million units to little more than 13 million units, and thus would have recorded a collapse of 26% on 2008 vehicle output. There have been far less bankruptcies of component and parts manufacturers than was generally expected at the depth of the crisis.
  • In terms of wider restructuring, they allowed a time for managed, and not enforced, rightsizing of industrial capacity.
  • Some of the scheme conditions observed do prejudge, to some extent, which brands, models, or powertrains may gain the most, or lose out completely. For example, we have shown that larger cars, premium and luxury brands, and light commercial vehicles have been only marginal beneficiaries of these schemes. Some of the schemes specifically limit their scrapping scheme incentives to 'private individuals'.
  • Two-thirds of the 2.16 million units of estimated additional demand generated by scrapping schemes was in the lowest price segments (A and B segment cars, and Utility Vans). Only 4.7% of additional customers bought SUVs, compared with 6% buying MPVs, and 20% buying compact cars (C1). The other segments combined (including medium and large cars, and premium and luxury vehicles) only benefited from 1.4% of the incremental incentivized sales.
  • Our aggregate calculation for 2009 is that vehicle scrapping schemes added a net 0.16–0.2% to EU-wide GDP.
Date[15] Total Passenger Cars Registrations Total Auto Vehicle (Inclusing Commercial)
Units/Seasonality Units Y/Y
2015-01-01 14,182,584 9.13%
2014-01-01 12,996,324 5.42%
2013-01-01 12,328,655 -1.56%
2012-01-01 12,523,650 -7.97%
2011-01-01 13,608,305 -1.36%
2010-01-01 13,796,230 -5.01%
2009-01-01 14,524,589 -1.46%
2008-01-01 14,739,999 -7.89%
2007-01-01 16,003,436 1.17%
2006-01-01 15,819,054 3.70%
2005-01-01 15,254,120 -0.62%
2004-01-01 15,349,816 1.76%

China

  • Car sales in the country gained 33 percent in 2010 and 53 percent in 2009 thanks to Beijing's stimulus measures, including tax incentives for small cars and subsidies for mini-van buyers in rural areas. The policies were scaled back in 2010 and scrapped completely at the beginning of 2011.
  • In 2009 and 2010, China undertook a 4 trillion Yuan fiscal stimulus, roughly equivalent to 12 percent of annual GDP. The “fiscal” stimulus was largely financed by off-balance sheet companies (local financing vehicles) that borrowed and spent on behalf of local governments.[16]
  • Beijing boosted purchases by slashing sales taxes on smaller, fuel-efficient cars and spending $730 million on subsidies for buyers of SUVs, pickup trucks and minivans. Stimulus spending on building highways and other public works also helped to boost sales of trucks used in construction.[17]
  • Back in 2009, Chinese authorities halved the tax to 5% for cars with 1.6 liter engines or smaller and raised it to 7.5% the next year before bringing it back to the original 10%.[18]
Date[15] Total Passenger Cars Sales Total Auto Vehicle Sales
Units/Seasonality Units Millions Y/Y Units Millions Y/Y
2015-01-01
2014-01-01
2013-01-01[19] 17.93 18 21.98 14
2012-01-01[20] 15.5 7.1 19.31 4.3
2011-01-01[21] 14.47 5.2 18.51 2.5
2010-01-01[22] 13.8 33.9 18.1 32.4
2009-01-01[23] 10.3 52.9 13.6 44
2008-01-01[24] 6.76 7.27 9.38 6.7
2007-01-01[25][26][27] 6.3 8.79 21.8
2006-01-01 3.8 7.22 25.3
2005-01-01 5.76 13.5
2004-01-01
https://www.statista.com/statistics/233942/chinas-share-of-global-production-capacity-of-the-automobile-industry/#:~:text=In%202021%2C%20about%2032.5%20percent,had%20been%20manufactured%20in%20China.

Prices

https://public.tableau.com/views/USAutomotiveIndustry/PricesIndexedRecessionStart?:language=en-US&:sid=&:display_count=n&:origin=viz_share_link

US

New

https://public.tableau.com/shared/XGMMQ9W2H?:display_count=n&:origin=viz_share_link

Used

[28]

Europe

[29]

Specific Companies Financials

Volkswagen
Date Revenue (M) Y/Y Sales (Units) Y/Y Profit After Tax (M) Y/Y EPS Y/Y Gross Margin Y/Y Employees Y/Y Production (Units) Y/Y Net Cash Flow Y/Y CAPEX Y/Y Inventories Y/Y
2005 93,996 5,192,576 1,120 2.90 13.0 344,902 5,219,478 2,391 4,316 12,643
2006 104,875[30] 11.6% 5,720,096 10.2% 2,750 145.5% 7.07 143.8% 13.2 1.5% 324,875 -5.8% 5,659,578 8.4% 5,631 135.5% 3,644 -15.6% 12,463 -1.4%
2007 108,897[31] 3.8% 6,191,618 8.2% 4,122 49.9% 10.43 47.5% 15 13.6% 329,305 1.4% 6,213,332 9.8% 7,109 26.2% 3,644 0.0% 14,031 12.6%
2008 113,808[32] 4.5% 6,271,724 1.3% 4,688 13.7% 11.92 14.3% 15.1 0.7% 369,928 12.3% 6,346,515 2.1% -2,679 -137.7% 6,773 85.9% 17,816 27.0%
2009 105,187[33] -7.6% 6,309,743 0.6% 911 -80.6% 2.38 -80.0% 12.9 -14.6% 368,500 -0.4% 6,054,829 -4.6% 2,563 -195.7% 5,783 -14.6% 14,124 -20.7%
2010 126,875[34] 20.6% 7,278,440 15.4% 7,226 693.2% 15.17 537.4% 16.9 31.0% 399,381 8.4% 7,357,505 21.5% 4,835 88.6% 5,656 -2.2% 17,631 24.8%
2011 159,337[35] 25.6% 8,361,294 14.9% 15,799 118.6% 33.1 118.2% 17.6 4.1% 501,956 25.7% 8,494,280 15.5% 1,112 -77.0% 7,929 40.2% 27,551 56.3%
2012 192,676[36] 20.9% 9,344,559 11.8% 21,717 40.9% 46.42 40.24% 18.2 3.41% 549,763 9.5% 9,255,384 9% -223 10,271 29.5% 28,674 4.08%
BMW
Date Revenue (M) Y/Y Sales (Units) Y/Y Profit After Tax (M) Y/Y EPS Y/Y Gross Margin Y/Y Employees Y/Y Production (Units) Y/Y Operating Cash Flow Y/Y CAPEX Y/Y Inventories Y/Y
2005 46,656 1,327,992 2,239 3.33 22.9 105,798 1,323,119 6,184 3,993 6,527
2006 48,999 5.0% 1,373,970 3.5% 2,874 28.4% 4.38 31.5% 23.1 0.9% 106,575 0.7% 1,366,838 3.3% 5,373 -13.1% 4,313 8.0% 6,794 4.1%
2007 56,018[37] 14.3% 1,500,678 9.2% 3,134 9.0% 4.78 9.1% 21.8 -5.6% 107,539 0.9% 1,541,503 12.8% 6,246 16.2% 4,267 -1.1% 7,349 8.2%
2008 53,197 -5.0% 1,435,876 -4.3% 330 -89.5% 0.49 -89.7% 11.4 -47.7% 118,452 10.1% 1,439,918 -6.6% 4,471 -28.4% 4,204 -1.5% 7,290 -0.8%
2009 50,681[38] -4.7% 1,286,310 -10.4% 210 -36.4% 0.31 -36.7% 10.5 -7.9% 93,243 -21.3% 1,258,417 -12.6% 4,921 10.1% 3,471 -17.4% 6,555 -10.1%
2010 60,477 19.3% 1,461,166 13.6% 3,243 1444.3% 1.3 319.4% 18.1 72.4% 112,271 20.4% 1,481,253 17.7% 8,149 65.6% 3,263 -6.0% 7,766 18.5%
2011 68,821[39] 13.8% 1,668,982 14.2% 4,907 51.3% 2.3 76.9% 21.1 16.6% 118,865 5.9% 1,738,160 17.3% 7,077 -13.2% 3,692 13.1% 9,638 24.1%
Daimler AG
Date Revenue (M) Y/Y Sales (Units M) Y/Y Profit After Tax (M) Y/Y EPS Y/Y Gross Margin Y/Y Employees Y/Y Production (Units) Y/Y Operating Cash Flow Y/Y CAPEX Y/Y Inventories Y/Y
2005 95,209 2,061,904 4,215 4.09 3 293,839 2,049,512 11,032 3,445 19,139
2006 99,222 4.2% 2,072,884 0.5% 3,783 -10.2% 3.66 -10.5% 5 66.7% 274,024 -6.7% 2,249,973 9.8% 14,337 30.0% 3,005 -12.8% 18,396 -3.9%
2007 99,399[40] 0.2% 2,088,973 0.8% 3,985 5.3% 3.83 4.6% 8.6 76.0% 272,382 -0.6% 2,238,023 -0.5% 7,146 -50.2% 2,927 -2.6% 14,086 -23.4%
2008 95,873[41] -3.5% 2,072,876 -0.8% 1,414 -64.5% 1.41 -63.2% 2.8 -68.2% 273,216 0.3% 2,149,785 -3.9% -786 -111.0% 3,559 21.6% 16,805 19.3%
2009 78,924[42] -17.7% 1,385,715 -33.2% -2,644 -287.0% -2.63 -286.5% -1.9 -167.9% 256,407 -6.2% 1,456,369 -32.3% 10,961 -1494.5% 2,423 -31.9% 12,845 -23.6%
2010 97,761[43] 23.9% 1,895,432 36.8% 4,674 -276.8% 4.28 -262.7% 7.4 -489.5% 260,100 1.4% 1,940,732 33.3% 8,544 -22.1% 3,653 50.8% 14,544 13.2%
2011 106,540[44] 9.0% 2,111,106 11.4% 6,029 29.0% 5.32 24.3% 8.2 10.8% 271,370 4.3% 2,137,243 10.1% -696 -108.1% 4,158 13.8% 17,081 17.4%

Volkwagen

2009
  • The Automotive Division generated sales revenue of €93.0 billion in the reporting period. The 9.3% decline compared with the previous year was mainly due to volume and mix deteriorations.[45]
  • The shift in volumes towards smaller vehicles, especially in Germany, had a particularly adverse effect. Profit was also negatively impacted by exchange rate effects, including from currencies such as the Russian ruble, the Swedish krona, or the Polish zloty. The positive business performance in China is not reflected in operating profit, as our Chinese joint ventures are accounted for using the equity method.
  • During turbulent times, the Volkswagen Group’s financial position was strengthened above all by optimized inventories, which were reflected in the significant improvement in working capital. We aligned production volumes with the continuing critical market situation. The resulting reduction in inventories was a significant factor behind the reduction of cash tied up in working capital.
  • As the negative market development led to high inventories in the second half of 2008 in particular, production volumes were adjusted in fiscal year 2009. Worldwide inventories were much lower at the end of 2009 than in the previous year in the Group companies and the dealer organization. The lower inventory levels in the reporting period also took the pressure off many dealers.
  • Were even able to exceed the deliveries recorded in 2008. This is mainly due to our attractive model range, but also to incentive programs and support measures resolved by many countries to mitigate the effects of the financial and economic crisis on the automotive industry in particular. As announced, we gained additional market share worldwide during the crisis as a result of the good delivery situation.
  • €6.2 billion of funds were released from working capital, mainly because of the pronounced reduction in stockpiled inventories and lower receivables; in the previous year, the division had reported funds tied up in working capital of €2.1 billion. As a result, cash flows from operating activities rose sharply, by 45.6% to €12.8 billion.
  • At €5.8 billion, investments in property, plant and equipment in the Automotive Division were 14.6% lower year-on-year in fiscal year 2009. The ratio of investments in property, plant and equipment to sales revenue (capex) was in line with our expectations at 6.2% (6.6%). At €1.9 billion, capitalized development costs were lower than in the previous year (-12.1%)

By Geography

Deliveries to customers worldwide amounted to 6,336,222 vehicles in fiscal year 2009, which was 1.3% over the previous year’s figure.

Sales of almost all Group brands were adversely affected by the financial and economic crisis. Only the Volkswagen Passenger Cars and Škoda brands were able to improve their deliveries year-on-year, mainly due to high demand in Germany and China.

  • In fiscal year 2009, deliveries to Group customers in Western Europe fell below the previous year’s level. This region accounted for the largest proportion of our vehicles sold, accounting for 46.1% (previous year: 47.8%) of the Group’s total delivery volume. Sales of almost all Group brands fell year-on-year due to the difficult market environment. Only the Volkswagen Passenger Cars and Škoda brands were able to exceed 2008 sales figures due to positive effects from government subsidy programs.
  • In Central and Eastern Europe, deliveries to customers were down 31.2% year-on-year.
  • Volkswagen Group deliveries in South Africa were down 28.0% year-on-year due to the repercussions of the financial and economic crisis and continued restrictive credit policies, with demand for entry-level models in particular dropping sharply.
  • In the past fiscal year, the Volkswagen Group increased its sales in the German passenger car market by 17.6% year- on-year; this was mainly as a result of the government scrapping premium and our attractive product portfolio.
  • Despite the negative trend on the global market, the passenger car markets in the Asia-Pacific region recorded an overall increase in demand in fiscal year 2009 due to the positive development of the Chinese market, which profited from the tax breaks granted when buying small cars.
  • In the extremely sluggish US passenger car market, the Volkswagen Group’s sales figures fell only slightly below the previous year’s figure during the reporting period (–5.3%). The decline was thus lower than that experienced by the market as a whole. The US government’s incentive program was only able to ensure stability for a short time.
https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
* https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf

General Motors

Why did it failed?

GM’s financial stability had been crumbling prior to the 2008 economic recession and many blame management as being more concerned with turning a profit than pursuing quality and innovation. In 2005, the company reported a massive loss of $10.6 billion; this loss grew to $38.7 billion in 2007, and the following year the company warned that it would run out of cash around mid-2009 without the support of government funding, a merger, or selling off its assets.[46]

  • It became clearer during the 2000s that demand for less fuel-efficient vehicles, typically trucks, was losing momentum. Rising gas prices and changes in consumer preferences collided to make for a powerful storm that would help knock down the already financially-fragile GM.
  • During the ’80s and more so in the ’90s, the push towards fuel efficiency crippled GM in another way. Because the company was accustomed to making the biggest profit on its larger, less fuel efficient models, it failed to innovate on the product development front and was left behind.[47]
  • After the 2000s, GM continued to make what people saw as noncompetitive vehicles. GM was mainly selling poorly designed cars that were expensive to build. In the end, General Motors was put face to face with excess production capacity. . The company was known to focus mainly on profits from finance rather than building better vehicles and improving the current ones. Customer needs and expectations, innovation by competitors, and the availability of new technologies still didn’t force GM into making improvements.[48]
  • The company had mostly fixed costs for its manufacturing process. When sales went down, the costs didn’t. This is what affected GM the most. The company couldn’t keep itself afloat or even manufacture vehicles if it cut costs. On top of that, General Motors was known for having fixed costs on union contracts. They had to respect the legacy of healthcare costs and company pensions even if they tried to cut down on costs in other ways.

Best Selling Cars

Europe

Volume segments such as minicars made significant gainsin 2009 thanks largely to government-funded scrapping incentives, while demand for large models nearly collapsed.

Segment[49] Total Units 2009 % Change 2009 Comments
Minicar 1,649,074 +31.9%
Subcompact 3,206,522 +6.7%
Compact 3,206,522 +0.2%
Mid-Sized 849,544 -12.1%
Large 57,709 -11.0%
Coupe 57,310 +174.0% Number is high because of a comparison with low sales the year before;

this happens when new models or were only on the market for a few

months the year before

Roadsters 126,833 -33.2%
Car Derived Van 290,489 +24.1%
Small Minivan 440,222 +13.6%
Medium Minivan 751,533 -24.3%
Large Minivan 168,293 -25.7%
Small SUV 114,135 -3.8%
Medium SUV 492,034 -12.6%
Large SUV 38,497 -33.7%
Entry Premium 847,216 -2.6%
Lower Premium 632,269 -23.7%
Medium Premium 339,139 -20.1%
Upper Premium 36,563 -12.6%
Premium Coupe 162,268 -11.9%
Premium Roadster 130,438 -19.5%
Premium Medium SUV 199,686 +101.3% Number is high because of a comparison with low sales the year before;

this happens when new models or were only on the market for a few

months the year before

Premium Large SUV 179,335 -31.6%
Exotics 9,910 -30.8%

See more details: https://europe.autonews.com/article/20100421/ANE/100419894/europe-s-2009-segment-winners-and-losers

2001 Recession

Production

Sales

Prices

Inventory

Specific Companies Financials

Volkswagen
Date Revenue (M) Y/Y Sales (Units) Y/Y Profit After Tax (M) Y/Y EPS Y/Y Gross Margin Y/Y Employees Y/Y Production (Units) Y/Y Net Cash Flow Y/Y CAPEX Y/Y Inventories Y/Y
1999
2000
2001
2002
2003
2004

1990 Recession

References

  1. ↑ https://www2.deloitte.com/us/en/insights/economy/spotlight/automobile-impact-us-economy.html
  2. ↑ https://medium.com/@falconeer7777/engines-on-a-rollercoaster-why-the-auto-industry-is-cyclical-aebad2d49ace
  3. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
  4. ↑ https://www.oica.net/category/production-statistics/2010-statistics/
  5. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
  6. ↑ https://public.tableau.com/shared/WSYQK59QR?:display_count=n&:origin=viz_share_link
  7. ↑ https://www.stlouisfed.org/on-the-economy/2019/may/bigger-cause-2008-auto-sales-collapse-credit-conditions-economic-concerns
  8. ↑ https://s3.amazonaws.com/real.stlouisfed.org/wp/2018/2018-019.pdf
  9. ↑ https://www.nber.org/system/files/working_papers/w16351/w16351.pdf
  10. ↑ https://obamawhitehouse.archives.gov/blog/2010/04/05/did-cash-clunkers-work-intended
  11. ↑ https://fred.stlouisfed.org/series/TOTALSA
  12. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
  13. ↑ https://www.nbcnews.com/id/wbna31917402
  14. ↑ https://circabc.europa.eu/sd/a/bcc4c732-6f54-4047-b661-42a5f3d1c490/report_scrapping_schemes_en.pdf
  15. ↑ 15.0 15.1 https://www.acea.auto/figure/passenger-car-registrations-in-europe-since-1990-by-country/
  16. ↑ https://www.brookings.edu/articles/the-long-shadow-of-a-fiscal-expansion/
  17. ↑ https://www.sandiegouniontribune.com/sdut-china-surpasses-us-in-2009-auto-sales-2010jan08-story.html
  18. ↑ https://asia.nikkei.com/Spotlight/Caixin/China-automakers-call-for-stimulus-as-coronavirus-carnage-bites
  19. ↑ https://bestsellingcarsblog.com/2014/01/china-full-year-2013-wuling-hongguang-and-vw-lavida-reach-new-heights/#:~:text=The%20Chinese%20new%20car%20market,18%25%20to%2017.93%20million%20units.
  20. ↑ https://www.industryweek.com/the-economy/competitiveness/article/21959232/car-sales-in-china-disappoint-in-2012-china-automobile-association-says
  21. ↑ https://www.reuters.com/article/idUSL3E8CH0V9/
  22. ↑ https://www.reuters.com/article/idUSTRE70926X/
  23. ↑ https://www.reuters.com/article/idUSTOE60A053/
  24. ↑ https://www.reuters.com/article/idUSSHA361216/
  25. ↑ https://www.nytimes.com/2007/01/11/business/worldbusiness/11iht-chicar.4174983.html
  26. ↑ https://www.chinadaily.com.cn/business/2010-01/09/content_9292112.htm
  27. ↑ http://www.china.org.cn/english/business/239227.htm
  28. ↑ https://public.tableau.com/shared/Z6TWSFD99?:display_count=n&:origin=viz_share_link
  29. ↑ https://public.tableau.com/shared/Z6TWSFD99?:display_count=n&:origin=viz_share_link
  30. ↑ https://www.volkswagen-group.com/en/publications/corporate/annual-report-2006-2324/download?disposition=attachment
  31. ↑ https://www.volkswagen.co.uk/assets/common/pdf/annual-reports/annual-report-2007.pdf
  32. ↑ https://www.volkswagen.co.uk/assets/common/pdf/annual-reports/annual-report-2008.pdf
  33. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
  34. ↑ https://www.volkswagen-group.com/en/publications/corporate/annual-report-2010-2328
  35. ↑ https://www.volkswagen-group.com/en/publications/corporate/annual-report-2011-2329
  36. ↑ https://www.volkswagen.co.uk/assets/common/pdf/annual-reports/annual-report-2012.pdf
  37. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/b/OTC_BAMGF_2007.pdf
  38. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/b/OTC_BAMGF_2009.pdf
  39. ↑ https://www.bmwgroup.com/content/dam/grpw/websites/bmwgroup_com/ir/downloads/en/2012/hv/2011-BMW-Group-Annual-Report.pdf
  40. ↑ https://group.mercedes-benz.com/documents/investors/reports/annual-report/daimler/daimler-ir-annualreport-2007.pdf
  41. ↑ https://group.mercedes-benz.com/documents/investors/reports/annual-report/daimler/daimler-ir-annualreport-2008.pdf
  42. ↑ https://group.mercedes-benz.com/documents/investors/reports/annual-report/daimler/daimler-ir-annualreport-2009.pdf
  43. ↑ https://group.mercedes-benz.com/documents/investors/berichte/geschaeftsberichte/daimler/daimler-ir-annualreport-2010.pdf
  44. ↑ https://group.mercedes-benz.com/documents/investors/berichte/geschaeftsberichte/daimler/daimler-ir-annualreport-2011.pdf
  45. ↑ https://www.annualreports.com/HostedData/AnnualReportArchive/v/OTC_VWAGY_2009.pdf
  46. ↑ https://www.dividend.com/how-to-invest/how-to-bankrupt-a-multi-billion-dollar-company-general-motors-gm/#:~:text=What%20Pushed%20GM%20to%20Bankruptcy,than%20pursuing%20quality%20and%20innovation.
  47. ↑ https://www.dividend.com/how-to-invest/how-to-bankrupt-a-multi-billion-dollar-company-general-motors-gm/#:~:text=What%20Pushed%20GM%20to%20Bankruptcy,than%20pursuing%20quality%20and%20innovation.
  48. ↑ https://medium.failfection.com/general-motors-and-how-this-huge-company-lost-its-way-daeb4e01e7eb#:~:text=General%20Motors%20failed%20due%20to,Hummer%20was%20a%20big%20deal.
  49. ↑ https://europe.autonews.com/article/20100421/ANE/100419894/europe-s-2009-segment-winners-and-losers
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