UniCredit Bank Austria industry report:
The automotive industry is only slowly picking up pace
- Austria's automotive industry can expect growth in 2023, but is not expected to return to pre-crisis levels until 2024
- 2022 saw the automotive industry lose its growth lead over European competitors
- Production of finished vehicles proved to be a growth driver but could not prevent the loss of global market share
- Electric cars are driving increases in vehicle stock, even in saturated car markets
- Austria's automotive industry should continue to benefit from its close relationship with the German premium segment in the future
Austria's automotive industry has been one of the fastest-growing sectors in Europe in recent years, with losses in the supply sector partly offset by successes in the production of finished vehicles. In 2022, the industry could no longer escape the weak European car economy. "We expect the automotive industry in Austria to continue to grow in 2023, but not to return to pre-crisis levels until 2024 at the earliest. The industry is facing significant structural challenges, but should continue to benefit in the future from the economically stable position of German premium manufacturers", says UniCredit Bank Austria economist Günter Wolf.
The automotive economy will only slowly gain momentum in 2023
By 2021, the Austrian automotive industry had increased its growth lead over most EU manufacturing countries. It was not until 2022 that production growth in Austria, at 0.5 percent, fell short of the EU result of 4.5 percent. Sales growth in 2022 also rose more slowly than in 2021, at 3.9 percent to 18.5 billion euro.
At the beginning of 2023, the sector's economy continued to cool down, with the decline in production—along with the higher number of incoming orders in January—indicating that there are still material bottlenecks. In 2022, the supply bottlenecks for primary materials, especially the lack of semiconductors, were the biggest production obstacle for around three quarters of companies in the Austrian automotive industry. More than half of these companies were still affected in the first quarter of 2023. At EU level, supply bottlenecks actually worsened at the beginning of 2023. In the major manufacturing countries of Germany, France and the Czech Republic, around 80 percent of companies in the automotive industry are reporting production constraints due to a lack of primary materials. As a result, the automotive industry's production expectations of the have fallen too, in Germany at the beginning of March and in the Czech Republic, France, Slovakia and Spain in February. Austria's automotive suppliers cannot expect stronger demand from their most important customers' European locations until the second half of 2023.
Despite the difficult economic environment, the EU car market should develop positively overall in 2023. The latest expectations for 2023 range from a 5 percent increase in new car registrations in the EU by the European Automobile Manufacturers' Association to a low double-digit increase in the EU and the USA according to Ernst & Young's forecast. In both markets, sales of electric vehicles are expected to rise by more than 50 percent.
Production of finished vehicles proved to be a growth driver but could not prevent the loss of global market share
As the German automotive industry (among others) continues to migrate away from Europe, sales outlets for Austrian car suppliers are dwindling. 64 percent of total industry exports are delivered to the EU and 35 percent to Germany. The process has accelerated in recent years, which have been particularly loss-making for Europe's automotive industry. From 2008 to 2022, car production in the EU fell by 25 percent and in Germany by as much as 37 percent. In the same period, 16 percent more cars were produced worldwide.
That the automotive industry in Austria was able to partially escape the slowdown in car production in Europe and expand its growth lead over the European sector by 2021 was primarily due to successful exports of finished cars and commercial vehicles. Between 2008 and 2022, exports in the segment rose by an average of 2.7 percent a year to 10.4 billion euro. In the same period, exports of vehicle engines and other automotive parts from Austria rose by just 1.5 percent to 8.7 billion euro.
Overall, the industry has lost some of its global market share since 2008. The proportion of Austrian exports of vehicle engines and other vehicle parts in the product group's global imports fell from 2.3 percent in 2008 to 1.7 percent in 2021. After 2016, world market shares recovered slightly, at least until 2019, based on the growth in exports of fully assembled vehicles. Car production in Austria rose from 75,000 vehicles in 2016—the lowest level since the mid-90s—to almost 160,000 vehicles by 2019. 108,000 cars were completed in 2022.
Electric cars are driving increases in vehicle stock, even in saturated car markets
In most European countries, electric and plug-in hybrid vehicles are rapidly gaining market share. The increasing popularity of these vehicles can be explained by the growing number of new models, improved charging infrastructure and high subsidies. In 2022, buying of electric vehicles was encouraged in 21 EU countries through purchase premiums and in almost all member states through tax benefits for vehicle operation.
The growth in electric cars is driving further increases in vehicle stock, even in saturated car markets. In 2022, the number of cars in Austria grew by a total of 17,000 vehicles, while the number of electric cars grew by 34,000 vehicles. This means that 2.2 percent of all registered cars in Austria already have a purely electric drive.
To date, expectations for the market share of electric vehicles have been revised upwards almost successively. The switch to electric vehicles is likely to be even further away than planned, however, as indicated by current discussions about the "combustion engine ban" in 2035 and the batteries for electric cars becoming more expensive for the first time in ten years in 2022.
Changes in mobility patterns and vehicle technology offering new opportunities for growth
Vehicles with an electric drive and manufacturers that are increasingly offering automated vehicle systems have a high growth potential. The cost of sensors and chips will decrease as supply increases, while safety standards for driver assistance technologies will rise and drive demand for these systems. Despite the positive outlook, the automotive industry both in Austria and globally will not be able to make up for its declining sales in recent years until 2024 at the earliest. At the same time, competitive pressure on established manufacturers is growing, especially from new Chinese suppliers in the electric vehicle market. The share of Chinese brands in the European electric vehicle market reached almost 6 percent in 2022 and is expected to more than double by 2030.
"Austria's automotive supplier industry cannot escape structural change, of course, but it should continue to benefit from the economically stable position of German premium manufacturers in the future. Thanks to their innovativeness, companies in the segment will at least maintain their market share or benefit from rising incomes in many increasingly saturated car markets", Wolf concludes.
Enquiries
UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0)5 05 05-41954
Email: guenter.wolf@unicreditgroup.at