Both Japan and Germany have bought themselves competitive advantage by their exchange rate policies. China so far has not corrected much of that change.
German car exports to China tend to be higher-end vehicles where price is less of an issue. China imposes substantial taxes on luxury vehicles. Demand for them is more a product of how wealthy Chinese entrepreneurs and business people are feeling, and what the mood of the time is about more conspicuous consumption.
Exchange rates matter more in the mass markets where products are closer together in what they offer.
The German industry is based on the three main domestic groupings of VW, BMW and Daimler. Germany has collected top end brands to reinforce her position as a leading manufacturer of highly priced prestige vehicles.
VW owns Audi, Bentley, Bugatti, Porsche and Lamborghini. BMW has Maybach and Rolls Royce and Daimler has Mercedes. VW is still able to compete in the mass market alongside Toyota and General Motors as one of the big three global auto companies.
We anticipate modest growth in the industry this year and next. The main thrust will still come from China, with more worries about how far and how fast China can sustain the growth.
The automotive industry remains an important bellwether for the global economy where the main growth comes when new populations can afford cars for the first time. Ahead lie various technical challenges, with the advent of electric cars, the development of more automation to reduce the task of the driver and the continuous application of more computing power to the vehicle.
Success in pioneering the new shapes and capabilities of personal transport will determine the relative fortunes of companies, and may have considerable impact on the economic success of their sponsor nations as well. Today Germany and Japan still seem well placed and competitive, but they will need to innovate creatively to stay ahead.
The post-war history of the automotive industry reminds us there can be large swings in market shares, and individual breakthrough designs like the Beetle and Mini can make big differences to the car market.
