German carmakers towed out of recession by Asian accelerator (Feature)

By Jeff Black Jul 30, 2010, 3:06 GMT

Berlin - The 25,000th Porsche Panamera, a sports car the whole (wealthy) family can enjoy, has just rolled off the production line in Leipzig.

The 76,000-euro (99,400 dollars) V6/V8 1.8 tonne behemoth was launched just 15 months ago.

After a short, sharp shock in recession-hit 2009, the German car industry seems now to be back in rude health.

It's no coincidence that back in April 2009, as the economic downturn was claiming casualties across the global car industry, the Panamera was launched at the no-expense-spared Shanghai Automobile Show.

Asian sales have dragged Germany's luxury-laden car industry out of the recessionary ditch.

First-half figures released throughout July tell the story.

Daimler, which produces the Mercedes-Benz and Maybach luxury brands, ended the second quarter of 2010 with the best three-month results in its 86-year history, 2.1 billion euros in profits. China, says Daimler, is driving demand like never before.

'In the first five months of this year, the Chinese passenger car market expanded by more than half, while the passenger car business in India grew by almost one third,' a report by German carmakers association VDA in July said.

'There's no doubt about it, foreign business is what's currently driving this industry,' VDA boss Matthias Wissman said.

Bavarian luxury brand BMW announced in July that production and profit forecasts have been raised, just months after the firm had workers on reduced-time contracts because of lack of demand. BMW now aims to sell 10 per cent more cars in 2010 than the year before.

At Europe's largest carmaker, Volkswagen AG, which includes the VW, Audi, Skoda and SEAT brands, executives are also brimming with delight about booming export markets.

'High demand for group models in Western Europe, China, North and South America was a key reason for our strong result, along with the boost provided by lower product costs and positive exchange rate effects,' Chairman Martin Winterkorn said Thursday.

The company reported global sales up by a fifth compared with the first half of 2009.

But while the seemingly ever-increasing number of people in China and India able to afford a relatively expensive European vehicle is good news for the German carmaker, a more volatile factor has recently been heavily in play: The euro.

The single currency dove to lows of around 1 dollar 20 in June, on the back of uncertainty over deficits in the eurozone itself - an unusual event that can hardly be expected to keep German auto exports cheap for ever.

While the VDA's Wissman said that the industry 'could live with the euro at 1.20 dollars, 'a constant stream of ups and downs' would ultimately hurt the industry.

'The industry needs the most stable exchange rates possible,' he said.

The euro is back on the move, upwards, rising to over 1.30 at the end of July. In other words, significant risks to the boom in exports exist in a currency appreciating on the back of a gradual European upswing.

The Asian boom has masked a less exuberant recovery in sales in developed markets. Sales in 2009 were propped up across Europe by government sponsored scrappage schemes, although these benefited luxury manufacturers less. 2010 German domestic orders are expected to be down by a quarter on those from the previous year, the VDA said.

But perhaps the most important sign of life from the German car industry over the past twelve months has been a much greater focus on electric vehicles, prompted by Chancellor Angela Merkel's charge that the industry had been preoccupied with expensive gas guzzling limousines to the detriment of smart, green mobility of the future.

Attitudes have changed to such an extent that this month even Porsche, beloved of devoted petrolheads the world over, said that it is testing an electric version of its Boxster sportscar.

'We will definitely be offering an electric sports car in future, Porsche Chief Executive Michael Macht said.