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According to Colliers International’s latest research, shifts in economic power and manufacturing capacity over the last two decades have significantly impacted the demand and distribution dynamics of the automotive sector globally.
As of 2015, China accounted for circa 30 per cent of global passenger car sales, representing 400 per cent growth in less than 10 years. Over the same period however, car production across Europe has halved from 43 per cent to 21 per cent, with the western part of the continent bearing the brunt of this decline. Of the western European countries, Italy, France and Belgium have been most severely impacted. The UK and Spain saw marginal decline and to date, only Germany seems to have escaped any major decline in production volumes.
Karel Stransky, Director EMEA Corporate Solutions, Colliers International, said: “Motor vehicle production increased across the CEE region, with Slovakia, the Czech Republic and Romania among the fastest-growing markets. Our analysis suggests that this growth has been in large part fuelled by the shift in low to mid value production and other parts of the supply chain from Western Europe. This has been underpinned by factors such as low labour costs, government support and infrastructure improvements across CEE.”
Looking ahead
Colliers’ research shows that other global markets accounted for 80 per cent of new plant openings over the last five years. Currently 36 per cent of new plants under construction by European manufacturers are in Asia, with 27 per cent being built in Northern America.
Stansky explained: “European car manufacturers’ expansion focus has clearly shifted away from Europe to other global markets over the last five years. Given the level of latent demand, measured by car sales, coupled with the car manufacturers’ desire to increase local production, we are seeing the active development pipeline of new plants under construction globally showing an overwhelming focus towards emerging markets, such as China and Mexico.”
“In Western Europe, falling sales will put pressure on car manufacturers to increase efficiencies and reduce costs through supply chain reorganisation. CEE markets, and neighbouring nations such as Turkey, seem better placed to weather structural changes in supply and demand. They will continue to attract investment from automotive manufacturers seeking a compromise between proximity and lower labour costs, leading to lower production costs, able to service Europe and other overseas markets.
“As a result, the net impact on industrial space usage at various levels of the supply chain is likely to be negative with further plant closures possible, particularly in those locations with very low utilisation rates, which tend to be in Western Europe.
Car sales set to decline
In Europe, demographic change, continuing urbanisation, car-sharing and ‘car-free’ urban mobility policies all point to a decline in car sales across the old continent. In terms of new demand, a greater share is likely to be accounted for by ‘green’, eco-friendly models, under the auspices of European policy makers, and as a result of behavioural change and greater environmental awareness of customers.
Generally, particularly within the more mature automobile markets, the challenges faced by the car industry are likely to accelerate a shift by car manufacturers from sales to services, as already seen by some car manufacturers’ active interest in developing car-sharing service models, such as BMW’s DriveNow, Mercedes’ Car2Go and Ford’s GoDrive.
“The overall negative trend of declining production will be partly mitigated by on-going and future R&D investment into the production of clean technologies and fuel efficient vehicles, with new embedded digital technology” said Bruno Berretta, Senior Industrial Analyst, Colliers EMEA. He added “This will be instrumental in filling existing ‘production slack’ as new eco-friendly models are rolled out. This could help drive demand for ad-hoc specialist space. However, it won’t be enough to offset a decline in the total volume of space required by the industry.”
Colliers’ research also included an analysis of a growing car cluster in CEE which found that the establishment of a new car assembly plant can generate industrial space requirements of 400 to 500 m2 on average, for direct suppliers, for every 1,000 cars produced
Damian Harrington, Colliers Head of EMEA Research, explained: “For locations likely to see an increase in output, this calculation provides a very useful proxy of modern industrial demand. And, for those plant locations experiencing decline, the calculation can also be used to provide an indication of how much space could become vacant, depending upon the size of each plant.
“Given the lack of industrial space and land in strategic locations on or near large urban conurbations across Western Europe however, the possibility of new available empty sites should be seen as an opportunity rather than as a threat, particularly as demand for modern logistics facilities continues to rise.”
About Colliers International Group Inc.
Colliers International Group Inc (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 10 consecutive years, more than any other real estate services firm.
In the UK, Colliers International is one of the top real estate advisory organisations, employing over 700 people in 12 full service offices across the UK and Ireland.
For the latest UK news from Colliers International, visit colliers.com/uk/news or follow us on Twitter: @Colliers_UK or LinkedIn www.linkedin.com/company/colliers-international-uk
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