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Development of Key Customer Sectors

General Conditions

The most important market segment for Continental is the global supply business with the manufacturers of passenger cars and commercial vehicles, accounting for 73% of sales in fiscal 2016 (PY: 72%). 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 50% of sales in the year under review (PY: 49%), followed by North America with 26% (PY: 26%) and Asia with 21% (PY: 20%).

Development of new passenger car registrations
Demand for passenger cars in Europe (EU-28 and EFTA) rose sharply in 2016. On the basis of preliminary data from the German Association of the Automotive Industry (Verband der Automobilindustrie, VDA), the number of new passenger car registrations rose by almost 7% to 15.1 million units compared to the previous year. In addition to the continuing economic recovery, this strong demand was also attributable to the low interest rates and relatively high replacement demand. Among the major markets, this development was particularly pronounced in the year under review in Italy and Spain, with increases of 16% and 11% respectively. Demand for passenger cars rose by 5% in both Germany and France and by 2% in the U.K.

In the U.S.A., demand for light commercial vehicles, especially pickup trucks, rose by 7% year-on-year in 2016 due to low fuel prices and favorable lending rates. By contrast, demand for passenger cars fell by around 9%. Overall, the number of new car registrations reached a new record of 17.5 million units in the year under review, but this equated to growth of only 0.4%. After a rise of 3% in the first quarter, demand leveled off over the rest of the year to the same overall level as in the previous year.

In Japan, the subdued economic situation and low level of consumer confidence resulted in a 7% decline in demand for passenger cars in the first quarter of 2016. Over the rest of the year, demand for passenger cars initially stabilized in the second and third quarters before picking up in the fourth quarter by 6% compared to the weak fourth quarter of the previous year. In 2016 as a whole, demand for passenger cars in Japan fell 2% short of the previous year due to the weak first half of the year.

In China, the halving of sales tax on purchases of passenger cars with a cubic capacity of less than 1.6 liters – to 5% at the start of the fourth quarter of 2015 – continued to have a positive impact in the year under review. In the second half of 2016, demand was also boosted as purchases were brought forward as a result of uncertainty over whether the tax cut, which was due to expire at the end of 2016, would be extended. According to the VDA, passenger car sales volumes in China increased by a total of 18% to 23.7 million units in 2016.

India posted a 7% rise in demand for passenger cars in 2016. On a quarterly basis, there was an increase of 2% in the first quarter, 7% in the second, 18% in the third, and 2% in the fourth. The lower growth in the final quarter was due to the collapse in demand following the government’s surprise announcement of the cash reform in early November.

In both Brazil and Russia, demand for passenger cars fell further in 2016 as a result of recession, stabilizing at a low level during the course of the year. Sales volumes fell by 20% in Brazil and by 11% in Russia in the year under review.

According to preliminary data, global new passenger car registrations increased by almost 5% to 91.3 million units in 2016 thanks to strong sales growth in China, Europe, and India.

New registrations/sales of passenger cars
millions of units 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2016 Total Δ Prior Year
Europe (EU-28 and EFTA) 3.9 4.2 3.5 3.5 15.1 7%
U.S.A. 4.1 4.5 4.5 4.4 17.5 0%
Japan 1.2 0.9 1.0 1.0 4.1 -2%
Brazil 0.5 0.5 0.5 0.5 2.0 -20%
Russia 0.3 0.4 0.3 0.4 1.4 -11%
India 0.7 0.7 0.8 0.7 3.0 7%
China 5.5 5.2 5.6 7.5 23.7 18%
Worldwide 22.1 22.3 21.9 25.0 91.3 5%

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Development of production of passenger cars and light commercial vehicles
The situation in Europe was divided in the first half of 2016. In Western Europe, the rise in demand for passenger cars also resulted in higher production of passenger cars and light commercial vehicles weighing less than 6 metric tons in most countries. In Eastern Europe and particularly in Russia, by contrast, the continuing decline in demand resulted in a corresponding decline in production figures. In the third quarter, Russia recorded stabilization at slightly above the previous year’s low level, while production in Germany and France was below the high prior-year figures due to the lower number of working days. In the fourth quarter, passenger car production in Germany only just reached the level of the previous year. Turkey posted the highest volume growth in the fourth quarter. Passenger car plants in France, the U.K., Czechia, and Russia reported significant increases as well. Overall, preliminary data shows that the production of passenger cars and light commercial vehicles in Europe increased 3% year-on-year in 2016.

In North America, production of light commercial vehicles, particularly pickup trucks, was expanded in the year under review thanks to increased demand, whereas passenger car production decreased year-on-year. Preliminary data indicates that total production of passenger cars and light commercial vehicles increased by 2% in 2016.

Asia also presented a mixed picture in 2016 compared to the previous year. Particularly in China and India, there was a further increase in the production of passenger cars and light commercial vehicles as a result of increased demand. By contrast, production volumes decreased in countries such as South Korea and Japan. Preliminary data shows that production in Asia as a whole grew by 5% in 2016.

In South America, low demand led to a further decrease in the production of passenger cars and light commercial vehicles, but this stabilized at a low level during the course of the year. In the fourth quarter, the previous year’s quarterly figure was exceeded again for the first time in twelve quarters. According to preliminary data, production volumes decreased by 10% overall in the year under review.

On the basis of preliminary data, global production of passenger cars and light commercial vehicles grew by over 3% in 2016.

Production of passenger cars and light commercial vehicles
millions of units 2016 2015 2014 2013 2012
Europe1 21.4 20.7 19.9 19.2 19.0
North America 17.8 17.5 17.0 16.2 15.4
South America 2.8 3.1 3.8 4.5 4.3
Asia2 49.5 47.1 45.8 44.0 42.0
Other markets 1.0 1.0 0.9 0.8 0.7
Worldwide 92.5 89.4 87.4 84.7 81.4

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Development of production of medium and heavy commercial vehicles
In Europe, the rise in goods transportation by road, particularly in Western Europe, resulted in increased demand for trucks in 2016. As a result, production of medium and heavy commercial vehicles could be expanded significantly in Germany, France and the Netherlands. Overall, production of commercial vehicles weighing more than 6 metric tons in Europe increased by nearly 3% year-on-year according to preliminary data.

In North America, commercial vehicle production fell sharply in the first quarter of 2016 after low incoming orders in the fourth quarter of 2015. It stabilized at a high level in subsequent quarters, but did not reach the volumes of the previous year. According to preliminary data, production declined by 13% in 2016 as a whole.

In China, production of medium and heavy commercial vehicles increased again in the year under review after the substantial decline in the previous year. India also saw a sharp rise in production volumes. By contrast, production in Japan was down on the previous year’s level. Preliminary data shows that commercial vehicle production in Asia grew by 10% overall in 2016.

According to preliminary figures, South America posted a decline of around 23% in commercial vehicle production in 2016. This downward trend slowed over the course of the year.

According to preliminary data, global production of medium and heavy commercial vehicles rose by nearly 3% in 2016.

Production of medium and heavy commercial vehicles
thousands of units 2016 2015 2014 2013 2012
Europe1 625 609 569 634 604
North America 505 579 549 468 486
South America 80 104 184 246 184
Asia2 1,789 1,633 1,840 1,845 1,764
Other markets 0 0 0 0 0
Worldwide 2,999 2,924 3,143 3,193 3,038

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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 – the recovery in demand that began in the previous year initially continued in 2016 but slowed down over the course of the year. According to preliminary data, sales volumes of replacement tires for passenger cars and light commercial vehicles rose by almost 2% year-on-year in the year under review.

In North America, preliminary figures show that there was a 2% increase in demand for replacement tires for passenger cars and light commercial vehicles in 2016. The main reason for this was the rising number of kilometers driven due to low gasoline prices.

Asia experienced a further increase in demand for replacement tires for passenger cars and light commercial vehicles in 2016. Particularly in China – the most important Asian market – preliminary data indicates that demand climbed by 8% in the year under review. However, India and the countries of the Middle East also posted a noticeable rise in sales of replacement tires. In Asia as a whole, volumes of replacement tires for passenger cars and light commercial vehicles rose by more than 5% in 2016 according to preliminary data.

In South America, preliminary figures indicate that demand for replacement tires for passenger cars and light commercial vehicles fell by about 3% in 2016 due to the difficult economic situation.

Based on preliminary data, global sales volumes of replacement tires for passenger cars and light commercial vehicles rose by 3% in 2016.

Sales of replacement tires for passenger cars and light commercial vehicles
millions of units 2016 2015 2014 2013 2012
Europe 332 327 324 313 311
North America 283 278 277 264 255
South America 63 65 64 63 59
Asia 431 409 397 376 353
Other markets 45 43 41 39 37
Worldwide 1,154 1,122 1,103 1,056 1,015

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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 weighing more than 6 metric tons in Europe rose by over 3% in 2016. Demand mainly increased in Western Europe, whereas in Eastern Europe it stagnated.

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 2% year-on-year in 2016. Demand picked up in Mexico in particular.

According to preliminary data, demand for replacement tires for medium and heavy commercial vehicles in Asia rose by 4% in 2016. There was a significant rise in sales volumes in China, but also in India and the Middle East.

In South America, demand for replacement tires for medium and heavy commercial vehicles also declined initially in 2016 due to weaker economic activity, before stabilizing again over the course of the year. According to preliminary figures, the previous year’s sales volumes were exceeded by 1% overall.

According to preliminary data, global sales volumes of replacement tires for medium and heavy commercial vehicles in the year under review increased by 3% year-on-year.

Sales of replacement tires for medium and heavy commercial vehicles
millions of units 2016 2015 2014 2013 2012
Europe 23.7 22.9 23.4 22.7 21.0
North America 23.2 22.8 22.0 20.0 20.0
South America 13.6 13.5 14.0 13.7 12.5
Asia 86.9 83.4 84.8 83.4 79.4
Other markets 7.5 7.2 6.9 6.3 5.9
Worldwide 154.9 149.8 151.3 146.2 138.9

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