Management Report Economic Report Annual Report 2014 Continental AG 77
Production of light vehicles1
in millions of units 2014 2013 2012 2011 2010 Europe2 19.8 19.2 19.0 20.0 18.8 NAFTA 17.0 16.2 15.4 13.1 11.9 South America 3.8 4.5 4.3 4.3 4.2 Asia3 45.9 44.0 42.0 38.9 38.9 Other markets 0.9 0.8 0.7 0.6 0.6 Worldwide 87.4 84.7 81.5 76.9 74.4
Source: IHS, preliminary figures and own estimates.
1 Passenger cars, station wagons, and light commercial vehicles (<6t). 2 Western, Central and Eastern Europe, including Russia and Turkey.
3 Asia including Kazakhstan, Uzbekistan, Middle East and Oceania with Australia.
Development of light vehicle production
The global rise in demand for passenger cars, station wagons and light commercial vehicles also brought about an increase in global vehicle production of around 3% to 87.4 million units in 2014 on the basis of preliminary figures and estimates. A break- down by country and region shows a similar development as for new registrations.
Once again, Asia posted the highest growth in production. The increase of 1.9 million units (+4% year-on-year) was again main- ly attributable to China, where the production volume increased by nearly 1.7 million units (+8% year-on-year). In addition, pro- duction growth in Japan, Indonesia and Iran more than offset declining volumes in Thailand and India.
NAFTA, particularly the U.S.A., posted the second-highest growth again in 2014 with a rise in production of another 5% to 17.0 million units. A production volume at this level had not been achieved since 2000 with 17.2 million units.
Light vehicle production also increased in most countries in Europe in 2014. The sharp decline in Russian production of around 340,000 units was more than compensated by increas- es in Spain and Germany in particular. Overall, light vehicle pro- duction in Europe grew by 3% to 19.8 million units, but was still lower than it had been in 2011 (20.0 million units) and far from the record year 2007 (21.8 million units).
In South America, preliminary data indicates that the decreas- ing demand for new vehicles brought about a decline in light vehicle production of 16% in the reporting period, with Brazil and Argentina recording the highest losses.
Development of heavy vehicle production
In the year under review, global production of heavy vehicles stagnated at around 3.1 million units on the basis of preliminary figures. The highest growth was posted by NAFTA, where the production volume rose by 17% to around 542,000 units as a result of strong economic growth in the U.S.A.
In Asia, production declined by 2% year-on-year in 2014 on the basis of preliminary data and estimates. Declining truck produc- tion in China was only partly offset by higher volumes in India and Japan.
European heavy vehicle production was down 6% year-on-year in 2014. The introduction of the EU emission standard Euro 6 as at January 1, 2014, had resulted in truck purchases being made early here in the final quarter of 2013. Furthermore, demand for trucks failed to pick up in the year under review due to the sluggish economic recovery in Europe.
Production of heavy vehicles1
in thousands of units 2014 2013 2012 2011 2010 Europe2 543 576 580 632 487 NAFTA 542 464 485 450 311 South America 187 246 184 279 247 Asia3 1,858 1,897 1,783 1,949 2,136 Other markets 0 0 0 0 0 Worldwide 3,130 3,183 3,032 3,311 3,181
Source: IHS, preliminary figures and own estimates. 1 Commercial vehicles (>6t).
2 Western, Central and Eastern Europe, including Russia and Turkey.
Management Report Economic Report Annual Report 2014 Continental AG 78
Replacement sales of passenger car and light truck tires
in millions of units 2014 2013 2012 2011 2010 Europe 320 314 312 343 323 NAFTA 280 264 254 258 262 South America 66 63 59 58 55 Asia 387 367 347 334 311 Other markets 40 38 36 33 32 Worldwide 1,093 1,047 1,009 1,026 982
Source: LMC World Tyre Forecast Service, preliminary figures and own estimates.
In South America, preliminary figures indicate that truck pro- duction declined by 24% to around 187,000 units in the year under review as a result of the recession in Brazil and other countries.
Tire replacement markets
Global replacement business with passenger car and truck tires is crucial to our sales in the Tire division. Due to the higher volumes, the passenger car and light truck tire replacement markets are particularly important to the economic success of our Tire division.
Development of passenger car and light truck tire replacement markets
Global demand for replacement passenger car and light truck tires grew by 4% year-on-year in 2014 on the basis of prelimi- nary data and estimates, with all regions posting increases in demand. A total of 1.09 billion replacement passenger car and light truck tires were sold worldwide, again setting a new sales record.
Nearly half of this growth was once again attributable to Asia, the world’s largest replacement passenger car and light truck tire market. As in the previous year, the rapid establishment of the vehicle pool in this region as a result of high demand for passenger cars over the past years is reflected in rising demand for replacement tires. This could be seen particularly in China, where sales volumes rose by around 10% or over 12 million passenger car tires, accounting for more than half of the increase in demand in Asia. However, Japan, India and Indonesia also recorded substantial increases.
In Europe, Continental’s most important replacement tire mar- ket, demand for replacement passenger car and light truck tires normalized in the first three quarters of 2014 after the compar- atively weak sales figures for 2012 and 2013. However, the very mild weather in the fourth quarter of 2014 resulted in a significant year-on-year decline in winter tire business. On the basis of preliminary figures, the sales volume for the year as a whole increased by just under 2% compared to the previous year.
Demand for replacement passenger car and light truck tires in NAFTA grew further in 2014 due to the increasing number of miles driven. Imports of passenger car tires from Asia for the budget tire segment therefore also rose. According to prelimi- nary figures, there was a year-on-year increase of 6% for 2014, corresponding to around a third of the global increase in demand.
South America and the other markets also recorded an increase in demand for replacement passenger car and light truck tires.
Development of commercial vehicle tire replacement markets
The upturn in replacement commercial vehicle tire business continued in 2014. According to preliminary figures, global demand increased by 6.1 million commercial vehicle tires (+4%). Asia, the largest market, once again saw the highest increase in volume of around 4.1 million commercial vehicle tires (+5%) due to rising demand from the growing Chinese economy. In Europe however, demand grew year-on-year by only 1% in the year under review due to economic stagnation. Growth in de- mand in NAFTA was very strong at 8%. Volume sales in South America remained nearly on par with the previous year, while in the other markets they also increased.
Replacement sales of commercial vehicle tires
in millions of units 2014 2013 2012 2011 2010 Europe 22.3 22.0 20.6 23.4 21.5 NAFTA 21.5 20.0 20.0 20.7 19.6 South America 13.6 13.7 12.5 13.0 12.7 Asia 87.0 82.9 79.2 77.2 74.4 Other markets 6.7 6.3 5.9 5.5 5.5 Worldwide 151.1 145.0 138.2 139.6 133.7
Management Report Economic Report Annual Report 2014 Continental AG 79
A wide range of different electronic, electromechanical and mechanical components are used to manufacture our products for the automotive industry. Key input materials for these com- ponents include various raw materials such as steel, aluminum and copper as well as plastics. Developments in the prices of these materials generally influence our costs indirectly via changes in costs at our suppliers. Depending on the contractual arrangement, these are either passed on after a time lag or redefined in upcoming contract negotiations.
Carbon steel and stainless steel are the input materials for many of the mechanical components such as stamped, turned and drawn parts and die casting parts used by Continental. In the case of carbon steel, falling costs for coking coal and iron ore together with continued modest demand for steel in the year under review led to price decreases in the mid single-digit percentage range on average. By contrast, prices for stainless steel rose by around 2% on average in the year under review owing to the increased price for the alloying element nickel.
Aluminum is used by Continental primarily for die casting parts and stamped and bent components, while copper is used in particular for electric motors and mechatronic components. The development of prices for copper in 2014 was again simi- lar to that of carbon steel. Its average price for the year declined by around 7% on a U.S. dollar basis compared to the average price for the previous year. The price of aluminum increased by over 20% on a U.S. dollar basis by the end of August 2014
compared to the beginning of the year, before also rapidly fall- ing back to its initial level toward the end of the year under review. The average price for the year was almost the same as in the previous year.
To coat a wide range of components, we and our suppliers use precious metals such as gold, silver, platinum and palladium. Comparing the average prices per troy ounce in U.S. dollars in 2014 and 2013, the quoted price of platinum decreased by 7%, that of gold by 10%, and that of silver by 20%. By contrast, the price of palladium rose by 11% in the year under review.
Various plastic granulates, known as resins, are required by our suppliers and by us, primarily for manufacturing housing com- ponents. During the year under review, prices for plastic granu- lates initially increased slightly before then declining until the end of the year due to the falling oil price. In terms of average prices for the year, there was a decrease of around 4%.
Continental uses various types of natural rubber and synthetic rubber for the production of tires and industrial rubber prod- ucts in the Rubber Group. It also uses relatively large quantities of carbon black as a filler material and of steel cord and nylon cord as structural materials. Due to the large quantities and direct purchasing of the raw materials, their price development has a significant influence on the earnings of the Rubber Group divisions, particularly the Tire division.
Price developments of selected raw materials – Automotive Group (indexed to January 1, 2008)
Sources:
Hot rolled coil Europe from SteelOrbis (€ per metric ton).
Stainless steel strip 2mm 304 CR Europe from Metal Bulletin (€ per metric ton).
Source:
Rolling three-month contracts from the London Metal Exchange (U.S.$ per metric ton).
0 20 40 60 80 100 120 140 160 180
Carbon steel Stainless steel
2008 2009 2010 2011 2012 2013 2014 0 20 40 60 80 100 120 140 160 180 Aluminum Copper 2008 2009 2010 2011 2012 2013 2014