Top German auto brands step on the gas, for now

3rd August 2010, Comments 0 comments

Strong results by BMW on Tuesday demonstrate the recovery by German luxury car makers this year, with the group reporting a seven-fold leap in quarterly profit that kept it ahead of Audi and Mercedes.

Other automotive brands such as Honda of Japan and France's Peugeot have also benefited from the recent upturn in the global economy, as have heavy truck makers like MAN, Mercedes and Scania as logistics demand grows worldwide.

Most in the industry nonetheless expect the fast lane will end later this year as major markets such as China begin to slow, a trend seen last month in many eurozone countries.

"We cannot say this will last for the next 12 months," automotive professor Willi Dietz from the German Institut fuer Automobilwirtschaft told AFP.

The market for heavy vehicles is particularly susceptible to economic trends and premium carmakers will also watch to see how Volvo fares now that it is owned by Geely of China.

That will give the Swedish brand a lot of traction in the world's largest auto market.

For the moment, however, some premium German car makers are reporting breath-taking profit increases.

BMW posted a second-quarter net profit of 834 million euros (1.1 billion dollars), compared with 121 million euros in the same period in 2009.

The results shattered expectations of analysts polled by Dow Jones Newswires who had forecast net earnings of 674 million euros.

BMW reiterated its unit sales forecast of 1.4 million in 2010 and chief executive Norbert Reithofer told a telephone press briefing it would be operating at more than 90 percent capacity this year.

European automakers have been boosted by the euro's fall in value against the dollar which "greatly improves their situation in most of the Asian and North American markets," Dietz noted.

That could change if the euro remains above 1.30 dollars or gains in strength.

But Daimler, which owns Mercedes Benz, has raised its core earnings outlook to six billion euros this year while Volkswagen, Europe's biggest car maker and Audi's parent group, forecasts record sales of more than 6.3 million vehicles.

Audi expects to deliver more than 200,000 cars in China and surpass its 2008 record of one million vehicles worldwide.

Honda reported a record quarterly profit of 3.15 billion dollars as Japanese car sales pursue a year-long upward trend and Peugeot pushed back into the black with a first-half profit of 780 million euros.

Indian carmakers posted robust sales in July as well, in a market forecast to triple over the next decade to six million vehicles.

But Peugeot head Philippe Varin spoke for many when he warned that for the rest of this year "the economic context is clearly going to be less favourable than in the first half.

"Market volumes will show a significant decline in Europe," Varin forecast, and raw material prices are expected to rise.

New car sales in France, Germany, Italy and Spain fell sharply in July, the US market is also set for a slowdown, and even searing hot Chinese sales will cool down, experts say.

"We will have to deal with seasonal effects," as the northern hemisphere's summer comes to an end, BMW's Reithofer acknowledged.

In Germany, new car sales plunged by 30 percent in July and production was down by five percent, the automaker's federation VDA reported.

But federation president Matthias Wissmann was upbeat, saying: "Robust orders from abroad and an expected improvement in the domestic market by the end of the year will have a positive effect on the full-year 2010."

© 2010 AFP

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