Historical auto year

The auto industry has plenty to celebrate this year. First an anniversary: Carl Benz and Gottfried Daimler invented the automobile 125 years ago. And then some great business news: Never before have so many cars been sold worldwide.

In particular, Germany's big carmakers have benefitted from the strong demand for new cars. Volkswagen is now aiming to replace General Motors as the world's largest car manufacturer.

But the competition isn't sleeping. South Korea's Hyundai-Kia Group is racing ahead, and although Toyota continues to battle with the aftereffects of the earthquake and nuclear disaster, the Japanese auto giant remains a power to reckon with.

Remembering a special year

Volkswagen CEO Martin Winterkorn unintentionally generated some PR for the competition while being filmed at the Frankfurt International Auto Show inspecting the new Hyundia i30 as a competitor to the Golf. The seal on the steering wheel adjustment system "doesn't rattle," he said. Turning to one of his engineers, he asked: "BMW can't do this, we can't do this but why can they?"

The video, which appeared in YouTube, was a hit, generating 1.5 million clicks. The involuntary promotion for the competition will be remembered in a special year for the auto industry - one celebrating a 125-year-old history and record sales to boot.

"It will be the most profitable year for carmakers and suppliers that we've seen in 125 years," said Ferdinand Dudenhöffer, director of the Center Automotive Research at the Duisberg-Essen University. "This means German carmakers like VW, BMW and Daimler will achieve dream results, selling more vehicles than ever and entering the new year with a fat earnings padding."

For 2011, Dudenhöffer said he expects about 60 million new vehicles to be sold worldwide. Auto analyst Frank Schwope from the NordLB state bank expects even more. He put the figure at 80 million, citing statistics from the International Organization of Motor Vehicle Manufacturers.

This year, GM is expected to be the world's largest manufacturer, selling nearly 9 million cars. Volkswagen will rank second with 8 million, followed by the former market leader Toyota with about 7 million.

The Japanese manufacturer, however, has struggled with quality problems and the aftermath of catastrophes such as the earthquake and nuclear crash in its own country and the floods in Thailand, where important production plants and suppliers are located. "Toyota was an injured competitor this year, a noticeably injured one," Dudenhöffer said.

World's leading carmaker

By contrast, VW is coming ever so close to achieving its goal of becoming the world's leading carmaker. The Wolfsburg-based manufacturer is already number one in Europe, and its Golf, Passat and Polo models are now the three most sold vehicles in Germany. The VW group, which includes the Audi and Porsche brands, has a 37 percent market share.

While analyst Schwope said sees VW battling GM for the top spot over the next couple of years, he warned against underestimating competitors like Toyota, Renault/Nissan and Hyundai-Kia. He said he could also imagine a Chinese manufacturer soon entering the ring.

But Schwope questioned whether the goal of becoming the world's largest carmaker is worth the effort.

"It is, first and foremost, a prestigious title but you need to ask consumers if they absolutely need to buy a car from the world's largest mass-production automaker," he said.

More important than size is profitability, especially next year, when the boom is expected to pass, Schwope said.

Dudenhöffer said between 300,000 and 400,000 fewer vehicles would be sold in Europe and no growth in the US market. Car sales, he added, will continue to climb in China but not with the double-digit growth of the past few years due to internal problems like inflation.

"Taken altogether, we don't expect car sector to grow in 2012," he said.

But that isn't going to stop the big carmakers from striving for a piece of the huge Chinese market, where the gold rush continues. To make a comparison: Germany expects to end the year with about 3 million new car registrations, compared to 14 million in China. And by 2017, more than 28 million new vehicles are expected to roll over Chinese roads.

China boom

"Made-in-Germany" luxury models are benefitting from this demand. In the first three quarters of this year, Mercedes sold more than 135,000 vehicles in China, or 33 percent more than in the same period a year earlier. By September, BMW had sold more than 177,000, up 46 percent over the same period the year before. And Audi, which is the premium brand market leader in China, increased sales by 30 percent to 226,000 during the same period

Even if the growth tempo in China should slow, the market will remain far from saturated, according to Schwope. "China has more than 1.3 billion people," he said. "And if you apply Western standards, that corresponds to 555 autos per 1,000 people. So China would need more than 600 million cars."

That number is about 10 times worldwide production in 2011. Such gigantic potential also makes clear the need to develop motors that consume less fuel and emit less carbon dioxide. Not surprisingly, electric cars have become a big trend.

Dudenhöffer pointed to 2011 as a historical year for auto industry also because of its advances in electrical cars. For the first time, he noted, mass-produced electric-powered motors have entered the market.

Although their market share is still relatively small, it now exists. That is the good news. Yet some hurdles remain: Electric cars remain too expensive and their battery capacities are too limited, restricting the distances they can travel without a recharge.

Electric cars

By 2011, analysts expect between 70,000 and 80,000 electric cars to be sold worldwide. They had to lower their projections from initially 100,000 due to the catastrophes in Japan, which hindered local manufacturers in their development work on cars and batteries.

Nevertheless, it is just a matter of time for electric cars to become commonplace, according to Stefan Bratzel from the Center of Automotive Management at the Bergisch Gladbach Technical University.

"There will be a revolution in car manufacturing," he said. "But it won't come overnight."

Experts like Dudenhöffer are convinced that the auto industry will remain a key industry of the future. He points to the role the industry will continue to play in mobility, growth and prosperity.

Author: Klaus Ulrich / jb

Editor: Sean Sinico