EMCC European Monitoring Centre on Change

EMCC dossier on the European automotive industry

The automotive industry - a pioneer of industrial manufacturing which has weathered the storms of capitalism over the last century - is in crisis as it struggles to keep up with the increasingly rapid changes of the global economy. This EMCC dossier is a compilation of reports, regional and company case studies as well as scenarios, providing an in-depth analysis of the trends and forces driving change in the sector. An ‘interactive map’ showing basic statistics for each country and the main car assembly plants completes the dossier.

The automotive industry is one of the largest and most multinational of all industries. It produces nearly 60 million cars and trucks a year and employs several million people around the world. It is a key indicator of economic growth and a major contributor to the gross domestic product (GDP) of several Member States and the EU. But the industry that more or less invented modern industrial capitalism a century ago is struggling.

Over the past five years, there has been a slowdown in economic output across the EU. Weak growth has led to reduced consumer and business confidence. Industrial production, including the production of durable consumer goods, has declined. This has impacted severely on the car industry, given the car’s status as the ultimate consumer and fashion item, as well as the importance of engineering and design in the manufacturing process. Average profit margins have declined from around 10% in the 1960s to less than 5% today, and some volume car makers are actually losing money.

And yet there are powerful forces at work that could profoundly change the industry. The reports, regional and company case studies as well as scenarios that comprise this dossier on the automotive industry provide an in-depth analysis of the current situation and bring to light factors likely to shape the future of car manufacturing in the years ahead.

Trends and drivers of change in the EU automotive industry

The mapping report provides an overview of the European automotive industry, covering all 25 EU Member States and the three candidate countries, Bulgaria, Romania and Turkey. It describes the current economic situation, production levels and employment situation in the sector across all countries and points to the industry’s strengths and weaknesses in the present context.

The report analyses key drivers of change such as competition, the supply industry, legislation, consumer demand, and technology. It examines the resulting trends in terms of work organisation, technology and employment. Various aspects of these trends and drivers have been picked up in the accompanying reports on the automotive cluster in Baden Württemberg (Germany) and the West Midlands (UK) as well as in the company case studies.

The mapping report also sketches a brief picture of the truck industry, and related retail and services market.

The full report, Trends and drivers of change in the EU automotive industry: Mapping report (pdf599 kb), is available for downloading free of charge.

Distribution of car assembly plants in EU countries: An interactive map

An interactive map illustrates the geographical distribution of the main car assembly plants in the EU Member States, with a particular focus on the Czech Republic, Hungary, Poland, Slovakia and Slovenia, which joined the EU on 1 May 2004, and the two candidate countries, Turkey and Romania. This online tool also provides basic statistics on the industry for each country, including employment figures, and indicates the scale and distribution of investment in different EU Member States.

The automotive cluster in Baden-Württemberg (Germany) and the West Midlands (UK)

These reports look at the automotive industry cluster in the German federal state of Baden-Württemberg and the West Midlands region in the United Kingdom. Both reports provide a short profile of the regions as well as of the automotive industry active in these regions. This is followed by an analysis of the way that the main trends and drivers for change in the industry - as identified in the mapping report- are reflected in the cluster, according to Porter’s ‘diamond model’.

The reports conclude with a SWOT analysis, exploring the competitive advantages of the cluster and possible scenarios for future developments of the industry in these regions.

Both reports are available for downloading free of charge by clicking on each title:The automotive cluster in Baden-Württemberg, Germany (pdf287 kb)The automotive cluster in the West Midlands, UK (pdf578 kb)

Motor vehicle industry trends affecting component suppliers

As major car makers focus more and more on core activities, component suppliers are playing an increasingly important role in the automotive industry, according to a report published in January 2005 by the International Labour Organisation (ILO). At present, component suppliers have a share of up to two-thirds of the value added of a car, which is expected to reach 75% among some manufacturers. Moreover, the worldwide employment breakdown between assemblers and suppliers, which is currently estimated to be on average 54:46 is likely to move towards a ratio of 33:66.

The report, Motor vehicle industry trends affecting component suppliers, discusses employment development, social dialogue and rights at work, and industrial relations in transport equipment manufacturing. It stresses the fact that the pressure to continuously reduce costs, diversify, and deliver to just-in-time schedules, will impact on working conditions in suppliers, and require even greater flexibility on the part of the workforce. The annexes (pdf 151 kb) provide a detailed list of first-tier suppliers, which sets out their 2003 sales results in Europe and worldwide as well as employment figures for the same year. In addition, Annex 2 looks at estimates of employment in the automotive industry from 1992-2002.

Industrial relations in the automotive sector

In December 2003, the European Industrial Relations Observatory (EIRO) compiled a study comparing the main characteristics of industrial relations in the automotive sector. The comparative study covers the EU15 and Norway as well as four of the new Member States: Hungary, Poland, Slovakia and Slovenia. It examines key features of trade union and employer representation and collective bargaining, and the policies adopted by companies. The study also looks at evidence of emerging transnational industrial relations in the sector.

As a monitoring tool, EIRO offers regular updates and analysis on industrial relations in the automotive and other sectors.

The automotive sector of tomorrow

Trends and drivers of change in the EU automotive industry: Four scenarios

The scenario report, Trends and drivers of change in the EU automotive industry: Four scenarios, sets out four different scenarios for future developments in the European automotive industry over the next decade. The scenarios presented focus on the passenger car segment (including mini-vans and light trucks), and include all companies with manufacturing sites in Europe. They challenge assumptions in the automotive sector by focusing on the key uncertainties, i.e. high level / low level of demand for products, and the two dominant trends shaping today’s industry, i.e. high degree / low degree of consolidation.

The scenarios also consider the implications for the industry in terms of plant locations, organisation of work and production, and the resulting changes in skills requirements.

The full report, Trends and drivers of change in the EU automotive industry: Four scenarios (pdf288 kb), is available for downloading free of charge.

Sector futures

Sector Futures provides a series of three specialised feature articles based on the monitoring of existing foresight studies, scenario work, innovation studies and reliable data sources. The first feature in the series on the automotive sector, The automotive sector at a crossroads (pdf 306 kb), puts the spotlight on trends and driving forces that will map its future.

The second feature, Scenarios for the automotive sector (pdf 225 kb), explores scenarios and other relevant future work likely to shape developments in the sector. It draws up two contrasting scenarios, which are not intended as accurate pictures of the future, but which - through projecting trends and ideas that are current in 2004 - present alternate possible outcomes for the future. The article concludes with a ‘wild card’ scenario that, should it occur, would severely threaten the future of the industry.

The third and last article in this series, Balancing conflicting pressures: The automotive sector of tomorrow (pdf 228 kb), focuses on policy issues for the future of the sector. Its objective is not to propose policy per se, but rather to stimulate dialogue and debate about policy alternatives aimed at both safeguarding the future of the industry and guaranteeing a safer and cleaner environment for all citizens.

Driving forward - futures for the automotive sector from a regional perspective

Anticipating change in the automotive sector and the implications for employment was the subject of a two-day workshop organised by the European Monitoring Centre for Change (EMCC) in Warsaw on 23-24 September 2004. Policymakers and representatives from the social partners attended the event with nearly half the participants coming from the new Member States. Led by expert speakers, they examined the sector’s key drivers and trends and looked at scenarios for further development. Assessing the possible implications for the industry’s structure as well as for employment and working conditions, the ‘Driving forward’ workshop report summarises the discussion results and provides a number of policy recommendations for private and public sector actors at different territorial levels.

EMCC company case studies in the automotive sector

The six company case studies highlight the scale and scope of the European automotive industry. They illustrate how companies, in different segments of the automotive value chain, are developing strategies to adapt to the evolving global competitive and regulatory environment while trying to meet consumer demands for value and capability.

The company case studies can be downloaded as pdf documents free of charge by clicking on the company's name.

  • DaimlerChrysler (pdf814 kb), the world’s largest commercial vehicle manufacturer, encompasses car, bus and truck manufacturing. The company continues to expand through its strategy of taking equity in other companies and remains at the forefront of technological change in the industry.
  • PSA Peugeot-Citroën (pdf329 kb) has experienced dramatic growth and success in recent years but remains essentially a European manufacturer. The company has pursued its own expansion strategy, involving a series of cooperation agreements and joint ventures with other manufacturers.
  • Volvo Truck Corporation (pdf759 kb), the world’s second-largest truck manufacturer, operates on a global basis in all the major markets. When the Volvo car company was sold to Ford, the truck company remained as part of the Swedish Volvo Group. The company has expanded through the acquisition of Renault’s truck business and the US White and Mack companies.
  • AVL (pdf358 kb) is a leading business in the field of engine design and development. The success of the company is based on the current trend among car manufacturers towards outsourcing research and development (R&D) as a cost-cutting measure. AVL is an example of a company in the knowledge-intensive business sector that supplies high-value services to the industry.
  • TRW Automotive (pdf312 kb) is a global first-tier supplier of modules and systems to all the major car manufacturers. Its company history clearly demonstrates the trend towards consolidation in the supply industry. TRW is now developing a specialist profile in the area of vehicle safety, and is also a major parts supplier to both the franchised and independent aftermarket.
  • Feu Vert (pdf245 kb) represents the retail sector for parts supplied directly to the public, and illustrates the range and importance of employment that supports vehicle manufacturing. Feu Vert’s clients include component manufacturers of the first, second and third tiers as well as non-original equipment manufacturers specialising in the aftermarket. The company illustrates the changes occurring in the retail and services part of the value chain - said to be the next to become ‘lean’.

Company restructuring in the sector

The European Restructuring Monitor (ERM) provides an overview of restructuring activities and employment effects in Europe, including the automotive sector (i.e. ‘motor’). All information is based on the analysis of daily newspapers and the business press in the EU15 and three new Member States, the Czech Republic, Poland and Slovakia. The data gathered is presented in concise online fact sheets, which can be searched and sorted by different criteria - for example, by country, company or type of restructuring.

Further relevant information sources

EMCC also highlights further information sources looking at the automotive industry, providing a brief summary and access details.

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