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2017 Annual Report

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2017 Annual Report

Continental Corporation - 2017 Annual Report
 

Development of Key Customer Sectors

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The most important market segment for Continental is the global supply business with the manufacturers of passenger cars and commercial vehicles, accounting for 72% of sales in fiscal 2017 (PY: 73%). The second-biggest market segment for Continental is global replacement-tire business for passenger cars and commercial vehicles. Because passenger cars and light commercial vehicles weighing less than 6 metric tons make up a considerably higher share of vehicle production and replacement-tire business, their development is particularly important to our economic success.

Continental’s biggest sales region is still Europe, which accounted for 49% of sales in the year under review (PY: 50%), followed by North America with 25% (PY: 26%) and Asia with 22% (PY: 21%).

Development of new passenger-car registrations
Demand for passenger cars in Europe (EU-28 and EFTA) continued to rise in 2017. On the basis of preliminary data from the German Association of the Automotive Industry (Verband der Automobilindustrie, VDA), new passenger-car registrations increased by 3% year-on-year to 15.6 million units. In addition to the ongoing economic upturn and low interest rates, this was attributable to relatively high demand for replacements, particularly in Southern and Eastern European countries. Among the major markets, Italy and Spain again posted the highest growth rates, both with 8%. Demand for passenger cars rose by 5% in France and by 3% in Germany. In contrast, the United Kingdom saw a 6% decline in demand.

In the U.S.A., the number of new car registrations fell by 2% to 17.1 million units in 2017, but remained at a high level. The reduction was due to a 12% decline in demand for passenger cars. In contrast, demand for light commercial vehicles, especially pickup trucks, rose by 4% year-on-year due to low fuel prices and favorable lending rates.

In Japan, the improved economic situation and increased consumer confidence resulted in higher demand for passenger cars in 2017. New car registrations rose by 6% to 4.4 million units.

After demand in China was curbed in the first half of 2017 by the increase in sales tax from 5% to 7.5% on passenger cars with a cubic capacity of less than 1.6 liters, sales volumes picked up again in the third quarter. However, the previous year’s record of 7.5 million units was not quite reached in the fourth quarter. According to the VDA, new passenger-car registrations in China rose by 2% to 24.2 million units in total in 2017. In the other BRIC countries, demand grew faster as a result of the improving economic situation. Sales volumes increased by 12% in Russia and by 9% in both India and Brazil.

The growth in sales volumes in Europe, Asia and South America more than offset the decline in demand in the U.S.A. in the year under review. According to preliminary data, new passenger-car registrations worldwide increased by over 2% to 93.3 million units in 2017.

New registrations/sales of passenger cars
millions of units 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2017 Total Δ Prior Year
Europe (EU–28 and EFTA) 4.3 4.2 3.6 3.6 15.6 3 %
U.S.A. 4.0 4.4 4.4 4.3 17.1 -2 %
Japan 1.3 1.0 1.1 1.0 4.4 6 %
Brazil 0.5 0.5 0.6 0.6 2.2 9 %
Russia 0.3 0.4 0.4 0.5 1.6 12 %
India 0.8 0.7 0.9 0.8 3.2 9 %
China 5.8 5.2 5.8 7.4 24.2 2 %
Worldwide 23.0 22.8 22.7 24.8 93.3 2 %
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Sources: VDA (countries/regions) and Renault (worldwide).

Development of production of passenger cars and light commercial vehicles
Preliminary data indicates that production of passenger cars and light commercial vehicles weighing less than 6 metric tons in Europe increased by 3% in 2017. Production rose significantly in Russia, Turkey and France in particular, while production in Germany, Spain and the United Kingdom fell slightly short of the respective high figures of the previous year. The lower number of working days had a significant influence in Germany, while falling demand was the central cause in the United Kingdom.

In North America, the production of passenger cars and light commercial vehicles decreased by 4% on the basis of preliminary figures. The production of passenger cars declined considerably due to the lower demand. In contrast, the production of pickup trucks in particular increased as a result of demand. The production of passenger cars and light commercial vehicles fell by more than 8% in both the U.S.A. and Canada. This decline was only partly offset by a sharp rise in production in Mexico.

In Asia, production of passenger cars and light commercial vehicles increased in most countries in 2017. Japan, India and Iran saw high volume growth as a result of demand. Production also still increased sharply in China in the first quarter, but the momentum slowed palpably over the rest of the year. Nevertheless, the growth of around 570,000 units was the largest volume growth of all Asian countries. Due to the high comparative basis of 27.1 million units, however, this equated to an increase of only 2%. South Korea, Australia and Malaysia posted declining production data. Preliminary data shows that production in Asia as a whole grew by 3% year-on-year in 2017.

In South America, the recovery of demand led to an increase in production of passenger cars and light commercial vehicles. According to preliminary data, production volume grew by around 550,000 units in the year under review compared to the weak prior-year figure.

On the basis of preliminary data, global production of passenger cars and light commercial vehicles grew by 2% to 95.1 million units in 2017.

Production of passenger cars and light commercial vehicles
millions of units 2017 2016 2015 2014 2013
Europe1 22.1 21.4 20.8 19.9 19.2
North America 17.1 17.8 17.5 17.0 16.2
South America 3.3 2.7 3.1 3.8 4.5
Asia2 51.5 50.0 46.4 45.8 44.0
Other markets 1.1 1.1 1.0 0.9 0.8
Worldwide 95.1 93.1 88.8 87.4 84.7
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Source: IHS Inc., preliminary figures and own estimates.
1 Western, Central and Eastern Europe, including Russia and Turkey.
2 Asia including Kazakhstan, Uzbekistan, Middle East and Oceania with Australia.

Development of production of medium and heavy commercial vehicles
In Europe, the improved economic situation in 2017 caused a rise in the transportation of goods by road and an increase in demand for trucks. Truck production was consequently stepped up in almost all countries, with Russia, Germany and Turkey posting the largest volume growth in the production of medium and heavy commercial vehicles. Overall, preliminary data shows that the production of commercial vehicles weighing more than 6 metric tons in Europe increased 9% year-on-year in 2017.

After the slump in the previous year, commercial-vehicle production in North America stabilized during the first half of 2017. The increasing economic momentum over the course of the year resulted in growing demand for trucks and a revival of truck production in the second half of the year. According to preliminary data, production increased by 8% in 2017 as a whole.

The production of medium and heavy commercial vehicles increased sharply in Asia, especially China, and reached record volumes. By contrast, production in Japan was again down on the previous year’s level. India also just failed to reach the production volume of the previous year. Preliminary data shows that commercialvehicle production in Asia grew by around 13% overall in 2017.

In South America, the economic recovery led to rising demand for trucks and an increase of around 20% in the production of medium and heavy commercial vehicles over the course of the year, according to preliminary data. Despite the significant volume growth, production in 2017 was still far below the production level of the precrisis years 2013 and 2014.

As a result of the production increase in all regions, preliminary data indicate that global production of medium and heavy commercial vehicles rose by 12% in the year under review.

Production of medium and heavy commercial vehicles
thousands of units 2017 2016 2015 2014 2013
Europe1 660 606 609 568 634
North America 513 475 581 550 470
South America 102 85 106 184 246
Asia2 2,140 1,894 1,636 1,843 1,845
Other markets 0 0 0 0 0
Worldwide 3,415 3,059 2,931 3,146 3,196
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Source: IHS Inc., preliminary figures and own estimates.
1 Western, Central and Eastern Europe, including Russia and Turkey.
2 Asia including Kazakhstan, Uzbekistan, Middle East and Oceania with Australia.

Development of replacement-tire markets for passenger cars and light commercial vehicles
In Europe – Continental’s most important market for replacement tires for passenger cars and light commercial vehicles weighing less than 6 metric tons – sales volumes of replacement tires for passenger cars and light commercial vehicles rose by 3% year-on-year in 2017 according to preliminary data. During the year, price increases announced for the second quarter of 2017 by many manufacturers, due to the rise in the costs of raw materials, caused purchases to be brought forward to the first quarter of 2017. This accordingly led to lower volumes in the second and third quarters, before sales volumes recovered again in the fourth quarter.

Sales volumes of replacement tires for passenger cars and light commercial vehicles also increased in North America in the first quarter of 2017 due to purchases brought forward. As a result, there was only very modest demand in the following quarters. According to preliminary figures, tire sales volumes in North America in 2017 as a whole stagnated at the high level of the previous year.

Asia posted a further increase in demand for replacement tires for passenger cars and light commercial vehicles in 2017. In China, Japan and India, the growing economy also resulted in higher sales volumes of replacement tires. Preliminary data shows that sales volumes in Asia as a whole grew by 5% in the year under review.

In South America, preliminary figures show that stabilization of the economy in 2017 led to an increase in demand for replacement tires for passenger cars and light commercial vehicles of about 11%.

Based on preliminary data, global sales volumes of replacement tires for passenger cars and light commercial vehicles grew by 3% in 2017.

Sales of replacement tires for passenger cars and light commercial vehicles
millions of units 2017 2016 2015 2014 2013
Europe 351 340 328 324 313
North America 285 285 278 277 264
South America 73 66 65 64 63
Asia 453 431 409 397 376
Other markets 47 45 43 41 39
Worldwide 1,208 1,168 1,123 1,103 1,056
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Source: LMC International Ltd., preliminary figures and own estimates.

Development of replacement-tire markets for medium and heavy commercial vehicles
According to preliminary data, demand for replacement tires for medium and heavy commercial vehicles in Europe increased by 4% in 2017. Russia, other countries of Eastern Europe, and France saw particularly high volume growth. The price increases announced by various manufacturers also resulted in purchases being brought forward in the first quarter and thus in skewed demand volumes during the course of the year.

According to preliminary data, demand for replacement tires for medium and heavy commercial vehicles in North America, our other core market for replacement commercial-vehicle tires alongside Europe, increased by 4% year-on-year. Here, too, the price increases announced by various manufacturers caused sharp fluctuations in demand during the course of the year.

In Asia, sales volumes of replacement tires for medium and heavy commercial vehicles grew by 3% in 2017 according to preliminary figures. Demand mainly followed the economic development of the individual countries. China, Japan and India posted the highest nominal growth.

In South America, the economic upturn again resulted in increasing demand for replacement tires for commercial vehicles in the year under review. According to preliminary figures, the sales volumes in the year as whole increased by 14% year-on-year.

There was a 4% increase in global demand for replacement tires for medium and heavy commercial vehicles in 2017.

Sales of replacement tires for medium and heavy commercial vehicles
millions of units 2017 2016 2015 2014 2013
Europe 25.3 24.4 22.9 23.4 22.7
North America 24.5 23.6 22.8 22.0 20.0
South America 15.7 13.7 13.5 14.0 13.7
Asia 89.2 86.6 83.5 85.3 83.9
Other markets 7.8 7.5 7.2 6.9 6.3
Worldwide 162.5 155.8 149.8 151.7 146.6
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Source: LMC International Ltd., preliminary figures and own estimates

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