2008 Detroit Auto Show: Clean-Diesel-Blitz in Full Swing - Sales Anticipated to Reach 1 Million Units

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FRANKFURT, Germany and DETROIT, Michigan, January 13 -- "German manufacturers have once again prevailed on the difficult U.S. market with excellent results. In 2007 they grew against the general trend and have boosted their sales by 3 percent to 948,000 light vehicles. We are confident that we will be able to continue to increase our U.S. market share even further this year and believe that the chances of passing the 1 million mark are excellent," emphasized Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), at the VDA press conference in Detroit. In addition to maintaining a strong position in the car segment, German brands saw gains primarily in the light trucks market, where sales rose by 14 percent in 2007. According to Wissmann: "Consequently, we grew more quickly in this segment than all other competitors. Apparently, our fuel efficient models are precisely what buyers are looking for during a time of ever-rising per gallon fuel costs." In the past 12 months alone fuel prices in the United States have increased by 43 percent.

The VDA President explained the success of the German automakers' strategy in the world's most important automotive market: "We are betting on the premium class and on clean diesel - for cars as well as light trucks. We are also launching a full frontal attack in the compact car segment."

Every second German-made car sold in the United States is already a premium class vehicle; the Germans have increased their market share in the luxury car segment to 41 percent.

Wissmann continues: "Clean diesel is the second pillar of our strategy. The market potential for a clean, fuel efficient and high performance self-igniting diesel engine is continuously expanding in the U.S. The required improved diesel fuel quality is now available nationwide. More and more U.S. car buyers are interested in the benefits clean diesel, the world's efficiency and fuel consumption champion, brings while making driving as enjoyable as it can be."

The VDA President also emphasized that "the German brands are the first to actively seize the huge opportunities clean diesel opens up in the United States. They are also pioneering new standards. Here in Detroit they are introducing new models that comply with the toughest emission limits. As a result, clean diesel is marketable in all 50 U.S. states, including California."

The fact that this message is also being embraced in the USA is evident in initial market data. In the first nine months of 2007, Mercedes had already more than doubled its sales of clean diesel vehicles. Audi, BMW and Volkswagen are ready to roll out their models.

Wissmann continued: "It is absolutely appropriate to name 2008 the year of breakthrough for clean diesel in the United States. Beware and do not misinterpret the market share of only 3 percent, which is indeed still low. It is just an indication of the calm before the storm and is driven primarily by model cycles. According to J.D. Power projections, the percentage of diesel vehicles in the total number of new vehicle registrations in the U.S. will multiply to 15 percent by 2015 - and the German brands will land in the top rankings." Last year, diesel cars still outperformed hybrid models in light vehicle sales at the rate of 480,000 versus 350,000 units.

In the light truck sector, which, at 53 percent market share, is still larger than the car segment, German manufacturers reaped the benefits of structural changes: While revenues in the large SUV segment, which is the traditional stronghold of U.S. manufacturers, dropped 11 percent last year, the more compact Cross Utilities Vehicles (CUV) gained a respectable 18 percent. "The Germans are particularly strong in the CUV segment. Given the increase in fuel costs it certainly comes as no surprise that car buyers are looking for more efficient vehicles that combine adequate performance with lower fuel consumption. This feat can only be achieved by drives that are more technologically exacting - which is on par with the core competencies of German automakers and automotive suppliers," comments Wissmann.

While the overall U.S. light truck market saw a decline of 6 percent over the past four years, German brands were able to boost their sales of light trucks on the U.S. market by 60 percent to 180,000 vehicles. According to Wissmann, "An official Premium SUV segment does not currently exist; however, the German brands are in the process of successfully creating this new standard." Audi, for instance has doubled U.S. Q7 revenues in 2007, while Mercedes saw a 100% increase in its G Class. VW has a presence with its Touareg, the Porsche Cayenne generated a plus of almost 20 percent and the BMW X5 saw its sales jump by more than 30 percent. New products - such as the GLK by Mercedes - are in the process of entering the market. "All of this proves: If you offer intelligent and state-of-the-art solutions, even the highly competitive light truck market in the United States offers a wealth of opportunities," confirmed the VDA President.

In the car segment, German brands also swam upstream and against the trend, increasing their sales by 1 percent to 768,000 units. As a result, the German market share in the car category has risen to more than 10 percent. The ranking of top-selling German brands in the United States in 2007 is led by the BMW 3-series, the VW Jetta and the Mercedes C Class hold second and third place, followed by the BMW 5-series and the Mercedes E Class. New rules of the game apply to the compact car segment - the keyword here is the smart fortwo, which is in high demand on the U.S. market.

Despite strong cross winds from the currency front evident in the euro's gain of close to 14 percent over the USD since early 2007, German manufacturers have advanced their exports to the United States by 3 percent to a total of 570,000 vehicles, which translates into sales that are close to three times higher than the revenues generated in 1995. U.S. exports make up a total of 13 percent of all German car exports. In terms of value, this translates into an even higher share of 18 percent. The average value of each car exported to this market is close to EUR 27,000 or USD 37,000 - a figure that greatly outpaces the average value of all cars exported from Germany (EUR 20,800).

In 2007, a total of EUR 23 billion in automotive products were exported to the United States. Every eighth euro generated by automotive exports is allocated to U.S. transactions. The trade balance surplus with North America totals around EUR 18 billion and consequently makes up 17 percent of Germany's total automotive trade balance surplus. Close to one third of the total German exports to the United States (EUR 74 billion in 2007) of 2007 were allocated to vehicles and automotive supplies. "As a result, the automotive industry has once again established its position as the number 1 source of currency in the German industry. Every 12th job in our industry now hinges on what we achieve in the U.S. market. This translates into work for about 60,000 employees. Consequently, it serves us well to partner in the transatlantic cooperation field in our business and technology policies," says Wissmann.

The German automotive suppliers are also expanding their strategic position in North America. Approximately 250 subsidiaries, joint ventures and licensees of German suppliers are now active on the North American market. The number of facilities they operate have more than tripled in the past 10 years. The export of automotive supplies to the U.S. has seen constant growth and is now at a level of more than EUR 3 billion per annum.

Wissmann emphasized that the U.S. business will likely not see any assistance from the currency exchange rate end in 2008. Accordingly, "Natural Hedging", which aims at reducing exchange rate risks, is becoming an ever more important tool. In the meantime, about 250,000 units of the total sales of German brands in North America are actually being manufactured in the NAFTA region. In other words, every fourth German brand vehicle sold in the U.S. is actually North American-made.

Wissmann presumes that the negative trends on the U.S. market - the real estate crisis, tougher credit lines, increased fuel prices - will continue to leave their mark. Another factor is that consumer demand, which still grew by 2.8 percent in 2007, is likely to drop to the projected 1.8 percent growth level. "Given these indices, we expect the total U.S. market for light vehicles to come in at around 15.7 million light vehicles, which translates into a decline of well over 2 percent. The pressure on the market will continue to be evident. Nonetheless, we expect the German brands to continue to grow," Wissmann concludes.

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