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Automotive: Putting on the Brakes?

Economic doldrums, demographic shifts, and climate change are among the factors forcing new realities on automakers.

Steve Stackhouse-Kaelble (Feb/Mar 08)
(page 2 of 2)
The Global Picture
Remember all that talk about China, and how automakers couldn't drive there fast enough? Well, the market for vehicles remains hot - GM, for example, says strong sales in mainland China helped it sell a record 1.44 million vehicles in Asia last year, up 15 percent. BMW has boasted that its China sales were up 42 percent last year.

However, the level of new facility construction and planning in China has slowed considerably, according to Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University Business School in Wales. "In China, there is some activity, but most manufacturers are using their expansions of the past, and quite a few Chinese manufacturers have spare capacity."

By contrast, says Rhys, areas of greater interest at the moment include Russia and India. "In Russia, growth in the economy is creating a big demand for commercial vehicles such as panel vans," he says, "with companies such as Volvo active in terms of expanding their capacity." India, meanwhile, "has opened up its market so that you can come in without a local partner," he says. "India was a very restricted economy, but is now much more liberalized."

Among other news, Tata Motors in India is working on a joint venture with Fiat that would build more than 100,000 premium vehicles a year. And Tata made worldwide headlines recently when it unveiled its new Nano model, which at $2,500 is said to be the world's cheapest car. Some people still don't believe it's physically possible to build a car that cheap, says Rhys, but it's clear that whatever the actual price turns out to be, it will be amazingly low.

To the west, "Europe is more or less marking time," says Rhys. "There doesn't seem to be any need at the moment for major expansion of activities, or a major downsizing of the industry, either. But within the next few years there might be a need for plant replacement." There are some exceptions. For example, Daimler is reported to be considering a new plant in Eastern Europe, with a decision possible in the first half of 2008. The plant would support Daimler's Mercedes-Benz unit. And French car maker PSA Peugeot Citroen is gearing up to produce its Partner and Berlingo professional cars at a factory in Vigo, Spain, with annual capacity of as many as 300,000.

Turmoil and uncertainty certainly are the buzzwords these days, and the automotive future promises both winners and losers. Cole can say one thing with certainty: "Be prepared for a volatile future."
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