Management Report > Economic Report > Annual Report 2014 > Continental AG 75
7.8% 7.4% 2014
2013 2014 1.6%
> Minimal growth: Despite the government’s extensive economic stimulus program, the economy saw hardly any growth in 2014. Japan even slid into recession in the second and third quarters of 2014 as a result of the hike in consumption taxes in April 2014.
> Inflation target achieved: The hike in consumption taxes led to an increase in the average inflation rate to 2.7% (2013: 0.4%), thus exceeding the medium-term target rate of 2%.
> Further decrease in unemployment: The unemployment rate fell to 3.7%.
> Significant depreciation of yen: Owing to the very expansive monetary policy, the yen depreciated considerably in 2014.
JAPAN
2013 2014
> Growth down slightly: The slowdown in economic growth continued in 2014, particularly in the second half of the year. Nonetheless, the Chinese government’s GDP target of 7.5% was almost achieved with a rate of 7.4%.
> Pace of foreign trade decreases: Imports and exports grew by around 7% in 2014, after around 10% in the previous year.
> Consistently low inflation: The inflation rate fell from 2.6% to 2.3%.
> Interest rate cut: The central bank lowered the key interest rate to 5.6% in November (January 2014: 6.0%). CHINA BRAZIL 2.5% 2013 2014 2.4%
> U.S. economy on path to recovery: After a weak first quarter due to the severe winter, the develop- ment over the remainder of the year showed the strong underlying momentum of the U.S. economy. Growth was supported by private consumer spending, private investment, and public-sector demand.
> Labor market developing positively: Employment rose steadily over the course of the year, causing the unemployment rate to decrease considerably to a level of 5.6% in December (January 2014: 6.6%).
> Rise in prices remains low despite very expansive monetary policy: Although pricing pressure accelerated somewhat in the first half of the year, over the year as a whole it averaged only 1.6% due to the recent decline in the oil price and the appreciation of the U.S. dollar. By contrast, asset prices rose significantly.
> Monetary policy of the U.S. Federal Reserve (Fed) still expansive: The Fed kept its key interest rate corridor between 0% and 0.25% throughout the year, but ended its asset purchasing program in October 2014. At the same time, the Fed announced that it would still keep interest rates at a low level for a considerable period.
U.S.A.
2.2% 2013
2013 2014 5.0%
> Increase in economic growth: The Indian economy picked up pace in 2014 after the change in government thanks to new infrastructure projects and reached a growth rate of 5.8%.
> Growth in imports and exports: After having decreased in the previous year, imports climbed by 8.5% in 2014. Exports also grew significantly again by 7.9%.
> Decline in inflation rate: The inflation rate fell from 8.8% in January 2014 to 5.0% in December as a result of the lower pricing pressure for food products.
INDIA
> Growth close to zero: Despite hosting the World Cup, the Brazilian economy hardly grew in 2014. In the second and third quarters, it even contracted slightly. Capital expenditure in particular declined.
> Inflation still at high level: The inflation rate was 6.3% in 2014 (2013: 6.2%).
> Further increase in interest rate level: The key interest rate was gradually increased to 11.75% by December 2014 (January 2014: 10.00%).
> Steady unemployment: The average unemployment rate for the year rose slightly to 5.5% (2013: 5.4%).
0.1%
0.1%
5.8%
Sources: IMF – World Economic Outlook 10/2014 and Update 1/2015, central banks 12/2014, European Commission – Eurostat, Regional Economic Outlook UPDATE Asia and Pacific Department 10/2014, Regional Economic Outlook UPDATE Western Hemisphere Department 10/2014, Germany Trade & Invest - PR China - mid-year 2014, Statistical offices of the respective countries, Destatis.
Management Report Economic Report Annual Report 2014 Continental AG 76
For Continental, global business with the manufacturers of passenger and commercial vehicles is the most important mar- ket segment, accounting for 73% of sales in fiscal 2014 (PY: 72%). The second-biggest market for Continental is global re- placement tire business for passenger and commercial vehicles.
Continental’s most important sales region is still Europe, which accounted for 53% of sales in the year under review (PY: 54%), followed by NAFTA with 22% (PY: 22%) and Asia with 20% (PY: 19%).
Vehicle markets
A key factor for our original equipment sales with automotive manufacturers is global production of passenger cars, station wagons and light commercial vehicles with a total weight of less than 6 tons.
Development of new passenger car registrations
Growth in global demand for vehicles continued in 2014. Based on preliminary data from the German Association of the Auto- motive Industry (Verband der Automobilindustrie – VDA), China once again posted the greatest increase in demand of 2.1 mil- lion units to 18.4 million units, thereby consolidating its position as the world’s largest passenger car market. However, the pace of growth in comparison to the previous year’s volume slowed from 23% in 2013 to 13% in the year under review.
Vehicle sales in den U.S.A., the world’s second-largest passenger car market, continued to increase as a result of economic growth. Compared to the previous year, they were up 6% at 16.4 million units in 2014 (PY: +8%). This meant that, measured in terms of vehicle sales volumes, they were back at their level from before the economic crisis in 2008 and 2009 for the first time.
In Japan, where the increase in excise duties as at April 1, 2014, had resulted in a 21% surge in new passenger car registrations in the first quarter of 2014, demand was down year-on-year on
a quarterly basis over the remainder of the year. In total, rough- ly 3% more passenger cars were sold in Japan in 2014 (PY: 0%).
Within Europe, the situation in the major sales markets in 2014 varied considerably: Germany (+2%), France (+0%) and Italy (+4%) posted only slight increases and, after the previous year’s declining registration figures, were still below the respective levels reached in 2012. By contrast, demand for passenger cars rose significantly by 9% in the U.K. and by 18% in Spain, boost- ed by a government incentive program. In total, new car regis- trations in Europe (EU28 + EFTA) increased by 5% year-on-year to 13.0 million units in 2014 (PY: -2%).
In contrast to most of Europe, vehicle sales in Russia declined in 2014 owing to the difficult economic situation. Compared to the previous year, they were down by another 10% (PY: -5%).
Brazil also posted a decrease in new registrations in the year under review as a result of the economic slowdown. Demand for passenger cars did not stabilize until the fourth quarter of 2014, when it almost matched the previous year’s level again after posting declines of 12% in both the second and third quarters. On an annual basis, new registrations were down 7% in 2014 (PY: -1%).
In contrast to the BRIC countries Brazil and Russia, India suc- ceeded in stabilizing its economy over the course of 2014. Following a decline of 7% in the first quarter of 2014, new reg- istrations were up again year-on-year in the following quarters. On an annual basis, the previous year’s level was just exceeded (PY: -8%).
Worldwide, preliminary figures indicate that 85.4 million new passenger cars were registered in 2014. However, the pace of growth continued to slow, amounting to 3.5% after 4.0% in 2013 and 5.9% in 2012.
New registrations/sales of passenger cars
in millions of units 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2014 Total 'Prior Year
Europe (EU28 + EFTA) 3.4 3.5 3.1 3.1 13.0 5%
U.S.A. 3.7 4.4 4.2 4.1 16.4 6% Japan 1.6 1.0 1.1 1.0 4.7 3% Brazil 0.8 0.8 0.8 0.9 3.3 –7% Russia 0.6 0.6 0.6 0.7 2.5 –10% India 0.7 0.6 0.6 0.6 2.6 1% China 4.5 4.4 4.2 5.3 18.4 13% Worldwide 21.3 21.6 20.7 21.8 85.4 4%
Source: VDA (countries/regions) and Renault (worldwide).