News September 10, 2019

Where is the automotive industry headed, Eric Heymann?

As Europe's leading international automotive exhibition IAA opens its doors in Frankfurt, Eric Heymann from Deutsche Bank Research investigates what is at stake for carmakers. And he looks into the future of mobility.

With only around 800 exhibitors left, the international car show IAA in Frankfurt seems to be less popular than in previous years – what is the main reason for that, Eric?

Eric Heymann: The global automotive industry has cooled down markedly over the past one to two years. Demand for new cars in some key markets has been falling over recent months. The weakening of cyclical conditions has had its effect on corporate earnings. Given this environment, budgets for trade fairs such as the IAA can shrink. In addition, international motor shows have recently lost some of their importance as meeting places for the industry, driven in part by technological change as manufacturers seek new and innovative ways to network and address their customers.

Have the Germans lost their love for cars or is this rather a temporary phenomenon?

This impression may have come about due to the automotive industry having recently produced negative headlines like the “diesel fuel” scandal and the ongoing climate protection debate. These topics have moved the car industry even more into the focus of the mainstream media and politicians. The fact remains, however, that the number of cars in Germany continues to grow from year to year. In addition, whilst SUVs are frequently criticised by the media and some politicians, they are becoming more and more popular. At the beginning of 2019, there were 5.8 million more cars on Germany's roads than 10 years before. So-called "motorised private transport" accounts for about 80 percent of the total traffic volume in Germany. This figure is similarly high in other industrialised countries. It is also true, however, that an increasing proportion of the urban population, in particular, is foregoing their own cars and renting or ridesharing if necessary.

What will mobility look like in the future, in 5, 10 or 20 years?

The answer to this question depends not least on the climate policy regulation of car traffic and also on the development of alternative modes of transport. In my view, cars will continue to play a major role in terms of passenger transport even in 20 years' time. Individual mobility is a core component of our liberal societies. And there is an enormous willingness to pay for access to one's own car at any time. Such consumption patterns, which have grown over decades, change only slowly, unless government regulation massively increases the cost of owning a car.

However, in 20 years, cars will be less harmful to the climate than they are today. They are likely to be better connected both with other vehicles and with their own environment. This will make road traffic more efficient. Car sharing and ride sharing are set to become more important, especially in cities. But it is true that public transport should equally play a greater role, provided the necessary investment in corresponding infrastructure is sufficient. Functional and more efficient public transport systems would encourage more people to do without their own car. The necessary investment comes at a price of course.

Eric Heymann is senior economist and mobility expert at Deutsche Bank Research.

How helpful was this article?

Click on the stars to send a rating