Trends in the markets
TRENDS IN THE MARKETS FOR PASSENGER CARS AND LIGHT COMMERCIAL VEHICLES
In fiscal year 2023, the volume of the passenger car market worldwide was noticeably higher than in the prior year at 76.6 million vehicles. Most markets registered growth, which together with weak prior-year figures was attributable to the fact that shortages and disruption in global supply chains eased restricting vehicle availability to a lesser extent. While the supply situation for intermediates improved compared with 2022, the trend in new registrations in individual markets dampened at the end of the previous year, partly as a consequence of the Russia-Ukraine conflict and pull-forward effects generated by state subsidies expiring.
Significant or strong growth was recorded in the overall markets of the Western Europe, Central and Eastern Europe, Middle East and North America regions. The markets of the South America region were slightly higher and the markets of the Asia-Pacific region noticeably higher than the prior-year level. The market in Africa fell slightly short of the prior-year volume.
In the reporting year, the global volume of new registrations for light commercial vehicles was on a level with the previous year (−0.2%).
Sector-specific environment
Along with fiscal policy measures, the sector-specific environment was considerably affected by the economic situation, which contributed to the mixed trends in unit sales in the markets in the fiscal year now ended. While real purchasing power fell in many places and vehicle prices stagnated at a high level, it was possible to reduce the backlog of orders on a large scale due to increased vehicle availability worldwide. The fiscal policy measures included tax cuts or increases, the introduction, expiry and adjustment of incentive programs and sales incentives, as well as import duties. In addition, non-tariff trade barriers to protect the respective domestic automotive industries made the movement of vehicles, parts and components more difficult.
Europe/Other Markets
In Western Europe, the number of new passenger car registrations in the reporting year was significantly higher than the previous year’s weak level, increasing by 13.8% to 11.6 million vehicles. The performance of the large individual passenger car markets was consistently positive in fiscal year 2023: France (+16.1%), the United Kingdom (+17.9%), Italy (+18.8%) and Spain (+15.8%) significantly exceeded their respective prior-year levels.
The volume of new registrations for light commercial vehicles in Western Europe was significantly higher than in the previous year, increasing by 16.3%.
The passenger car market volume in the Central and Eastern Europe region increased strongly by 23.6% in fiscal year 2023 to 2.3 million vehicles after a very strong dip in the previous year. The number of sales was also predominantly positive in the individual markets of Central Europe. The Czech Republic and Poland recorded significant growth of 15.3% and 13.0%, respectively.
The market volume of light commercial vehicles in Central and Eastern Europe in the reporting year was noticeably higher than the previous year’s figure (+7.3%).
The volume of the passenger car market in Türkiye in the reporting year was up more than 50% on the prior-year level. In South Africa, the growth trend that had persisted since 2021 came to an end, with the number of passenger car sales falling slightly by 3.8%.
The volume of new registrations of light commercial vehicles in Türkiye was very strongly (+38.1%) and in South Africa significantly (+16.5%) higher in the reporting year than the 2022 level.
Germany
At 2.8 million units, the total number of new passenger car registrations in Germany in fiscal year 2023 was noticeably higher than the weak prior-year level (+7.3%). Shortages and disruption in global supply chains eased, improving vehicle availability and allowing the backlog of orders from the previous year to be cleared. The number of passenger cars produced rose by 18.3% to 4.1 million vehicles and exports of passenger cars grew by 17.5% to 3.1 million units.
The number of sales of light commercial vehicles in Germany in the reporting year was significantly up on the 2022 figure (+15.7%).
North America
At 18.6 million vehicles, sales of passenger cars and light commercial vehicles (up to 6.35 tonnes) in the North America region in fiscal year 2023 were significantly higher than in the prior year (+13.1%). Market growth in the USA, which increased by 12.3% to 15.6 million units, was slightly below the average for this region. The Canadian automotive market also registered a significant increase in sales figures to 1.7 million units (+12.5%) in the reporting year, while new registrations of passenger cars and light commercial vehicles in Mexico saw a strong rise of 25.1% year-on-year to 1.4 million vehicles.
South America
In the South America region, the volume of new passenger car and light commercial vehicle registrations in the reporting year was slightly higher than the prior-year level at 3.7 million units, continuing the positive growth trend that had begun in 2021. In Brazil, the number of new vehicle registrations was significantly higher than the prior-year figure at 2.2 million units (+11.0%). In the Argentinian market, demand for passenger cars and light commercial vehicles in the reporting year also rose significantly by 11.7% to 425 thousand units.
Asia-Pacific
In the Asia-Pacific region, the volume of the passenger car market in fiscal year 2023 was noticeably higher than the previous year’s figure at 36.2 million units (+6.6%). The increased demand for passenger cars in the region was primarily determined by the trend in the Chinese passenger car market. Here, state subsidies and incentive programs expired at the end of 2022, causing pull-forward effects in vehicle purchases and consequently reducing the number of vehicle registrations at the beginning of 2023. Since then, demand has recovered, partly as a result of discounts and continuing regional incentive programs, while competition has intensified. Overall, the volume of demand in China totaled 22.2 million units (+5.5%), noticeably higher than the previous year’s level. In India, passenger car sales also rose noticeably by 9.9% year-on-year to 4.0 million units. New registrations in the Japanese passenger car market in the reporting year were significantly up on the prior-year level at 4.0 million units (+15.4%).
The volume of demand for light commercial vehicles in the Asia-Pacific region in 2023 was noticeably lower than the previous year’s level (−7.1%). Registration volumes in China, the region’s dominant market and the largest market worldwide, experienced a slight rise of 1.4% compared to the prior year. The number of new vehicle registrations in India was slightly below the prior-year level (−3.8%); in Japan this figure was slightly higher than in the previous year (+4.2%).
TRENDS IN THE MARKETS FOR COMMERCIAL VEHICLES
In the markets that are relevant for the Volkswagen Group, demand for mid-sized and heavy trucks with a gross weight of more than six tonnes experienced noticeable growth in fiscal year 2023 versus the comparison period (+8.5%). Global truck markets grew significantly, due in particular to a recovery of the Chinese market following the end of the country’s zero-Covid strategy.
In the 27 EU states excluding Malta, but including the United Kingdom, Norway and Switzerland (EU27+3), the number of new truck registrations was significantly up on the prior-year level, increasing by 15.1% to a total of 387 thousand vehicles. Growth could be observed in many truck markets in the region, albeit to differing degrees. The noticeable market recovery seen in 2022 accelerated during the reporting year to a significant level of growth. New registrations in Germany, the largest market in this region, were up strongly on the previous year (+23.6%). The United Kingdom recorded a significant increase of 13.6%, and demand in France was also significantly higher than in the previous year (+10.7%). Türkiye recorded a strong rise in new registrations of 17.8%. In the South African market, demand rose noticeably (+9.3%). The truck market in North America is divided into weight classes 1 to 8. In the segments relevant for Volkswagen – Class 6 to 8 (8.85 tonnes or heavier) – new registrations were noticeably higher (+9.7%) than the previous year’s figure. In Brazil, the largest market in the South America region, demand for trucks in the reporting year was significantly down on the previous year (−16.5%) due to the introduction of a new emissions standard at the beginning of 2023.
Demand in the bus markets relevant for the Volkswagen Group was strongly higher than in the previous year (+23.2%). Total demand for buses in the EU27+3 markets in the reporting year was up significantly on the previous year (+18.7%), with the picture varying from country to country. The school bus segment in the USA and Canada recorded a strong increase (+22.6%) compared with the prior year. Demand for buses in Mexico was even much stronger than in the previous year (+70.3%). In Brazil, demand was significantly higher than the prior-year level (+17.7%).
TRENDS IN THE MARKETS FOR POWER ENGINEERING
The markets for power engineering are influenced by varying regional and economic factors. Consequently, the business growth trends of the respective markets develop mostly independently of one another.
In 2023, the marine market remained at a similar level to the previous year. Demand in merchant shipping was mostly stable despite higher ship prices, and long waiting times due to high shipyard utilization rates. In this segment, in particular the market for tankers recorded a positive trend while the markets for container ships, LNG tankers and bulk cargo carriers saw a year-on-year decline. The market for cruise ships remained at a stable level overall due to positive developments in the last quarter of the reporting year. By contrast, the market for passenger ferries contracted. The special market for government vessels, which is funded by state investment, continued to be active due to the current geopolitical situation. The uncertainty regarding future fuel and emissions regulations persisted in the marine market in 2023, but in general a clear trend towards new fuel technologies was confirmed. Owing to the continued uncertainty about future fuels, demand regarding dual-fuel engines and retrofits increased in particular in the market for two-stroke engines.
There was reticence in the market for energy generation in 2023, particularly in Europe. This was due to the gas supply issues and the continued lack of a finalized framework for the future operation of power plants on the part of policymakers. The current focus on the expansion of renewable energy sources was reflected in corresponding potential in the demand for grid balancing facilities. Such facilities are used to meet power requirements if the share of renewables is not sufficient to ensure security of supply. A very positive trend was observed in the demand for power-to-methane plants. In the engines segment, there is a continuously rising demand for flexible dual-fuel engines. There is also a clear demand on the market for engines that can be converted for use with synthetic fuels such as hydrogen and green ammonia. Demand for new energy solutions such as hydrogen and long-term energy storage continued to be strong, with a clear trend towards greater flexibility and decentralized availability. However, the risks of a continued lack of price stability in the markets and the bottlenecks in supply chains were undiminished in the reporting period, as was the strong competitive and price pressure.
There was more movement in the turbomachinery market than in the previous year. Prices for raw materials continued to be high, leading to solid demand in the raw materials and processing industry for production facilities with turbo compressors. Sales of turbo compressors for oil and gas production were up year-on-year, bolstered by the persistently high demand for security of supply, as well as by an investment backlog. Among the new business fields, in the area of decarbonization sales of turbomachinery were up year-on-year. Demand for steam turbines used for power generation and gas turbines used for decentralized, industrial combined-heat-and-power installations was lower than in the previous year.
In 2023, the after-sales market for engines in the marine and power plant business was at the same high level as in the previous year.
In the after-sales market for turbomachinery, demand in the reporting year was up on the prior-year level.
TRENDS IN THE MARKETS FOR FINANCIAL SERVICES
Demand for automotive financial services was at a high level in fiscal year 2023; however, higher interest rates put pressure on demand for financial services in almost all regions.
The European passenger car market was still affected by shortages in the reporting year. Vehicle deliveries nevertheless increased and were up on the prior-year period. Demand for financial services products also grew; however, as a percentage of vehicle deliveries, the figure was down on the equivalent figure for 2022. The positive trend in the financing of used vehicles continued. The sale of after-sales products such as servicing, maintenance and spare parts agreements continued to expand.
In Germany, the persistent challenges presented by parts supply in vehicle production and by logistics chains continued to impact vehicle sales and the financial services business. Nevertheless, the increase in deliveries of new vehicles led to a higher volume of contracts in 2023. New vehicle penetration was down on the comparative figure for 2022, however. New contracts for used vehicles were on a level with the previous year. The number of new after-sales contracts increased and in the reporting year was above the level seen in 2022.
The Turkish market experienced considerable volatility. A combination of sharp interest rate hikes, the weak currency, persistently high inflation and a refinancing environment that continued to be challenging kept lending practices restrictive. Used cars continued to command high prices, despite the first signs of a decline.
In South Africa, financed vehicle purchases remained at a comparatively low level due to the subdued economic conditions, higher vehicle prices and increased energy prices. However, inflation eased, and after increasing interest rates ten times in succession from November 2021 onwards, the South African Reserve Bank did not raise interest rates again.
Compared with the previous year, the markets in the North America region developed positively on the whole in 2023, with demand for vehicles rising. Despite higher interest rates, new vehicle penetration in the USA and Canada was also above the previous year’s level, particularly in the leasing business. In Mexico, meanwhile, the penetration of leasing and financing contracts declined. The number of new contracts for after-sales products was up year-on-year throughout the entire region.
In the South America region, the positive growth trend in the volume of new vehicle sales continued. The market for financial services benefited from increased deliveries and growth was registered in the number of financing contracts. In Argentina, the level of financing contracts was stable in spite of challenging macroeconomic conditions. In Brazil, the number of new contracts rose thanks to the range of attractive financial services offered. The number of car subscriptions entered into also rose.
The Chinese automotive market witnessed a rise in demand for electrified and used vehicles. This in turn also affected demand for automotive financial services. At the same time, banks with attractive products are gaining a foothold in the market. In Japan, there was a positive trend in demand for automotive financial services thanks to a rise in vehicle availability. Interest rates that were relatively low by international comparison and attractive financial service offerings in many places were key features of this market.
The financial services business in the market for heavy commercial vehicles was slightly up on the prior-year level in fiscal year 2023. The lengthy delivery times for commercial vehicles are gradually beginning to return to normal. The borrowing habits of commercial vehicle customers changed due to the rise in interest rates: the decision on financing is moving closer to the time of vehicle delivery because customers are counting on falling interest rates.