Mercedes 2006 Annual Report Download - page 55

Economy and the industry
The world economy. The world economy continued along its
expansionary path in the year 2006. Despite high raw-material
prices with repeated increases for some materials, higher
interest rates and some tense political situations (particularly in
the Middle East), growth of 3.5% in 2005 was followed by 3.9%
in 2006. This was once again significantly above the long-term
average of approximately 3%. The trend was assisted by the
continuation of dynamic growth rates in the United States (+3.3%)
and China (+10.7%), surprisingly positive developments in Japan
(+2.2%) and the ongoing strong expansion of the emerging markets
(+6.9%). But another key factor for the acceleration of global
growth was the significant upturn of economic activity in Western
Europe (+2.7%), where developments had been disappointing
in the previous year. The German economy also showed strong
growth again for the first time in several years, expanding by
2.7%. However, this growth of the world economy in excess of the
long-term trend could not be maintained indefinitely and the
cycle already peaked in the first quarter of 2006, although with
significant regional differences (at first in North America, later
in Asia and at the end of the year in Western Europe). Growth was
increasingly dampened during the year by the increased cost
of capital, the ongoing burden of high raw-material prices, falls in
the high market values of real estate in some parts of the world,
and more restrictive fiscal policy in various countries. Global
economic imbalances – on the one hand the current-account
deficit of the United States, and on the other hand the immense
foreign-currency reserves in Asia and the current-account
surpluses of the oil-exporting countries – grew larger as the year
progressed, along with the potential risks for the capital markets
and the world economy. Economic growth in DaimlerChrysler’s
sales markets, weighted for each country’s share of the Group’s
revenues, was 3.3%. This was slightly higher than the prior-year
growth rate of 3.1% and the long-term trend of nearly 3% per
annum. The euro gained nearly 12% against the US dollar and 13%
against the Japanese yen during the course of the year, and fell
slightly against the British pound (by about 2%).
Automotive markets. The overall expansion of worldwide
automotive markets slowed slightly in 2006. Global demand for
passenger cars continued to grow at a positive rate (+3%),
but slower than in the prior year due to repeated increases in the
prices of crude oil and fuel. The commercial-vehicle market showed
a strong rate of expansion (+6%) – especially in the medium and
heavy segments – and a continuation of lively investment activity.
Sales of passenger cars and commercial vehicles in the United
States decreased slightly to 17.1 million units (2005: 17.4 million),
partially as a result of higher financing costs caused by the
continuous increase in interest rates and repeated sharp fuel-
price rises. The latter led to a change in customer preferences:
In a comparison of vehicle segments, small, fuel-efficient cars
profited considerably at the expense of minivans, SUVs and pick-
ups. Although demand in Western Europe increased slightly
to 14.6 million passenger cars (2005: 14.5 million), car sales did
not generally benefit commensurately from the region’s broad
economic upswing. Among the major national markets, car sales
increased in Germany (+4%) and Italy (+4%), but decreased in
France (-3%), the United Kingdom (-4%) and Spain (-2%). In Japan,
the car market shrank by 2% to 4.6 million passenger cars
despite the country’s positive economic performance. Driven by
double-digit growth rates for car sales in China and India,
the emerging markets of Asia were once again the main source
of growth for the global automobile industry. South America
also continued its dynamic expansion, while higher sales in Central
and Eastern Europe were almost solely a reflection of strong
growth in Russia.
Management Report | Business and Strategy | 39
Global automotive markets
JapanWestern EuropeTotal USA1South America1China
Source: German Association of the 1 Segment passenger vehicles
Automotive Industry (VDA) including light trucks
35
30
25
20
15
10
5
0
-5
Unit sales growth rate
2006/2005 (in %)
Passenger cars Commercial vehicles
Western EuropeNAFTATotal Japan Asia excluding
Japan Other
markets
10
8
6
4
2
0
Gross domestic product, growth rate (in %)
Economic growth
2005 2006
Source: Global Insight