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2018 Annual Report

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2018 Annual Report

Continental Corporation - 2018 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 2018 as in the previous year. 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, followed by North America with 25% and Asia with 22%, all of which were unchanged from the previous year.

Development of new passenger-car registrations
On the basis of preliminary data from the German Association of the Automotive Industry (Verband der Automobilindustrie, VDA), new passenger-car registrations in Europe (EU-28 and EFTA) remained stable year-on-year in 2018. High demand for replacements could be seen in Greece, the Netherlands, Spain and several Eastern European countries. In France, new passenger-car registrations rose by 3%. In contrast, the United Kingdom, Norway and Sweden each saw a 7% decline. Sales volumes were also down slightly year-on-year in Italy, Ireland, Austria and Switzerland. In Germany, the months of July and August saw a significant increase in new registrations of vehicles that could still be produced and registered in accordance with the New European Driving Cycle (NEDC) exhaustgas test procedure applicable until August 31, 2018. The introduction of the new test procedure WLTP resulted in considerably lower production and a decline in new vehicle registrations in Germany in particular between September and December 2018. All in all, new passenger-car registrations in Germany stagnated in 2018.

In the U.S.A., consumers’ preference for light commercial vehicles and pickup trucks continued in 2018. Sales volumes of these vehicles grew by 8%, or around 855,000 units, in spite of higher fuel prices and increased lending rates. By contrast, demand for sedans fell by 13%, or around 775,000 units. Overall, new registrations in the U.S.A. increased slightly by around 80,000 units year-on-year in the reporting year.

In Japan, demand for passenger cars picked up in the second half of 2018, compensating for the slight decrease in sales volumes in the first half of the year. Overall, sales volumes of passenger cars in 2018 were up marginally year-on-year at 4.4 million units, corresponding to the average level of the past five years.

According to the VDA, demand for passenger cars in China increased by almost 6% in the first half of 2018 as a result of the good economic situation. However, the escalating trade conflict with the U.S.A. and the resulting uncertainty among consumers led to a 7% decline in demand for passenger cars in the third quarter and a 15% decline in the fourth quarter. Overall, China posted a 4% decline in sales volumes of passenger cars in the reporting year. The other BRIC countries saw very substantial growth in demand in 2018. In Brazil and Russia, demand continued to recover, with increases of 14% and 13% respectively, compared with the weak equivalent period of the previous year. In India, new vehicle registrations rose by 5%.

According to preliminary data, global new passenger-car registrations fell by around 300,000 units to 92.9 million units in 2018. The growth in sales volumes in Brazil, Russia, India and the U.S.A. only partly compensated for the reduced demand in China.

New registrations/sales of passenger cars
millions of units 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2018 Total Δ Prior Year
Europe (EU–28 and EFTA) 4.3 4.4 3.6 3.3 15.6 0%
U.S.A. 4.1 4.5 4.3 4.4 17.2 0%
Japan 1.3 1.0 1.1 1.0 4.4 0%
Brazil 0.5 0.6 0.7 0.7 2.5 14%
Russia 0.4 0.5 0.4 0.5 1.8 13%
India 0.9 0.9 0.9 0.8 3.4 5%
China 6.0 5.5 5.4 6.3 23.3 -4%
Worldwide 23.6 23.9 22.1 23.2 92.9 0%
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Sources: VDA (countries/regions) and Renault (worldwide).

Development of production of passenger cars and light commercial vehicles
In Europe, the production of passenger cars and light commercial vehicles weighing less than 6 metric tons decreased in 2018 by 2% on the basis of preliminary figures. From September onward, the introduction of the new exhaust-gas test procedure WLTP put a noticeable dent in production volumes. German manufacturers in particular had to significantly limit their production, because not all models and their engine versions could be tested in advance in accordance with WLTP. In the year as a whole, production decreased in Germany, the United Kingdom and Turkey in particular. Without the higher production figures in Portugal, Russia and several Eastern European countries, the decrease in Europe would have been considerably larger.

In North America, the production of passenger cars and light commercial vehicles decreased by 1% to 17.0 million units in the reporting year on the basis of preliminary figures. Production declined in Canada, whereas the U.S.A. posted a slight increase in production. In Mexico, volumes remained at the previous year’s level.

In Asia, the development of passenger-car and light-commercial-vehicle production varied considerably in the year under review. There were substantial increases in production in India, Indonesia and Thailand. By contrast, China saw a significant decline in production in the second half of the year, partly as a result of the trade conflict with the U.S.A. Japan recorded marginal growth in production, while volumes in Iran and South Korea decreased. On the basis of preliminary figures, Asia recorded an overall year-on-year decline in production of 2% in 2018, which was primarily due to the decline in China.

In South America, demand continued to recover and production of passenger cars and light commercial vehicles saw a further increase in 2018. Production in South America grew by 4% in the reporting year, according to preliminary figures. This was particularly due to the increase in Brazilian production of around 100,000 units.

On the basis of preliminary figures, global production of passenger cars and light commercial vehicles fell by 1% to 94.0 million units in 2018 as a result of declining production in the major markets.

Production of passenger cars and light commercial vehicles
millions of units 2018 2017 2016 2015 2014
Europe1 21.7 22.1 21.4 20.8 19.9
North America 17.0 17.1 17.8 17.5 17.0
South America 3.4 3.3 2.7 3.1 3.8
Asia2 50.6 51.6 50.0 46.4 45.8
Other markets 1.3 1.1 1.1 1.0 0.9
Worldwide 94.0 95.2 93.1 88.8 87.4
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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, an increase in the transportation of goods by road in Central and Eastern Europe boosted demand for trucks in 2018. Preliminary figures indicate that overall there was a 3% year-on-year increase in the production of commercial vehicles weighing more than 6 metric tons in the reporting year.

In North America, production of medium and heavy commercial vehicles picked up significantly as a result of the high order volume and the good economic situation. Based on preliminary figures, production of commercial vehicles weighing more than 6 metric tons increased by 18% as compared to the weak prior-year figure.

In Asia, production of medium and heavy commercial vehicles was around 3% below the previous year’s level in the reporting year, based on the information currently available. In China in particular, there was a significant decline in the production of medium-weight commercial vehicles.

In South America, the economic recovery in the reporting year led to rising demand for trucks and an increase in the production of medium and heavy commercial vehicles of more than 40% compared to the very weak prior-year basis, according to preliminary data.

Preliminary figures indicate that global production of medium and heavy commercial vehicles rose overall by 2% in the year under review.

Production of medium and heavy commercial vehicles
thousands of units 2018 2017 2016 2015 2014
Europe1 663 646 605 602 568
North America 638 542 474 581 551
South America 155 110 85 106 184
Asia2 2,240 2,316 1,896 1,646 1,851
Other markets 0 0 0 0 0
Worldwide 3,695 3,614 3,060 2,935 3,154
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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 – sales volumes of replacement tires for passenger cars and light commercial vehicles weighing less than 6 metric tons rose by 2% year-on-year in the reporting year according to preliminary data. In the fourth quarter of 2018, momentum slowed due to weaker demand in Turkey.

In North America, sales volumes of replacement tires for passenger cars and light commercial vehicles picked up considerably in the second half of 2018 after a relatively weak first half of the year. This was partly attributable to purchases brought forward due to the price increases announced by some manufacturers for the end of 2018/the start of 2019. According to preliminary figures, demand for replacement tires for passenger cars and light commercial vehicles increased by 3% overall in the reporting year.

In China, a sell-off of tire dealers’ stocks resulted in a sharp decrease in sales volumes in the second half of 2018 as compared to the high comparative figures from the previous year. By contrast, India and Indonesia in particular recorded growing demand. In Asia as a whole, demand for replacement tires for passenger cars and light commercial vehicles grew 1% in 2018 according to preliminary figures.

In South America, the temporarily uncertain political situation in Brazil led to considerably subdued demand for replacement tires for passenger cars and light commercial vehicles in the second half of 2018. Preliminary figures indicate that the decline over the reporting year as a whole came to around 6% in comparison to the strong prior-year basis.

Based on preliminary figures, global sales volumes of replacement tires for passenger cars and light commercial vehicles grew by 1% in 2018.

Sales of replacement tires for passenger cars and light commercial vehicles
millions of units 2018 2017 2016 2015 2014
Europe 358 350 340 328 324
North America 296 288 285 278 277
South America 67 71 66 65 64
Asia 450 447 431 409 397
Other markets 49 48 46 44 42
Worldwide 1,220 1,204 1,168 1,124 1,104
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Source: LMC International Ltd., preliminary figures and own estimates.

Development of replacement tire markets for medium and heavy commercial vehicles
In Europe, preliminary figures indicate that demand for replacement tires for commercial vehicles weighing more than 6 metric tons dropped by 1% in 2018. The decline in demand in the United Kingdom and Turkey was offset only partially by volume growth in Russia and other Eastern European countries.

According to preliminary figures, 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 7% year-on-year thanks to a strong fourth quarter.

In Asia, sales volumes of replacement tires for medium and heavy commercial vehicles decreased by 1% in 2018 according to preliminary figures. The main reason for the weaker development was a decline in demand in China, which primarily resulted from the reduction of tire dealers’ stocks in the second half of the year.

In South America, preliminary figures indicate that sales volumes of replacement tires for commercial vehicles were up 2% in the reporting year, despite the high prior-year basis. This was primarily due to the positive development in demand for replacement truck tires in Brazil.

Overall, global demand for replacement tires for medium and heavy commercial vehicles in the reporting year remained at the previous year’s level according to preliminary figures.

Sales of replacement tires for medium and heavy commercial vehicles
millions of units 2018 2017 2016 2015 2014
Europe 25.8 26.1 24.5 23.0 23.4
North America 26.5 24.8 23.6 22.8 22.0
South America 14.8 14.5 13.7 13.5 14.0
Asia 87.0 88.2 86.6 83.7 85.2
Other markets 7.9 7.8 7.5 7.2 6.9
Worldwide 162.0 161.4 155.9 150.2 151.6
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Source: LMC International Ltd., preliminary figures and own estimates

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