Last week, as Germany geared up for its traditional Frankfurt auto show, the New York Times was reporting on some of the issues around this important auto event. The Frankfurt show is more than just a way for the public to get more information about the newest car models from various manufacturers. It’s also a critical place for these car makers to present their wares and get the kind of PR that will drive continued sales. But according to some covering the advent of this year’s Frankfurt auto show, these continued sales could be in jeopardy.
An in-depth story on the global car market shows vulnerability for the makers of luxury cars, including BMW and Mercedes, as well as Porsche, a company set to unveil their latest Porsche 911 model that will probably get the attention of many other reviewers. What some financial professionals are saying is that many of these firms will need to recognize some increased sales numbers from some new markets in order to stay afloat and keep pace with previous sales.
When analysts talk about sovereign debt, they’re not just talking about the Eurozone, although the ironic coincidence of the car event being held so close to the European Central Bank is not lost on many numbers watchers. The double whammy of American debt struggles and the credit poverty of many European Union nations is causing a lot of consternation and insecurity about the financial future for many of the individuals who buy what Porsche, Audi, BMW and the others are selling. Some suggest that sales for these cars may drop off because of market collapses like the one that happened in recent days as an already low Dow sunk into under-11,000 territory. When the market dips significantly, or in this case to 52-week lows, some of the wealthier customers looking at luxury car purchases may reconsider when their stocks or other holdings rapidly diminish in value.
That’s not to say there’s no bright spot in 2011 for luxury car makers. Astonishingly enough, the New York Times coverage shows a record August for Porsche, and robust sales for Ford in the European market throughout the summer. Analysts also cite China as a growing market, saying that for German maker Volkswagen, the Middle Kingdom has become its largest sales territory. But for many car makers, there’s no silver bullet for dealing with insecurity at home and the future will hinge on how the European and North American markets feel about what’s offered to them by auto makers. We’ve already talked about how big car manufacturers are preparing for this by offering less expensive, lighter, and more fuel-efficient vehicles for the 2012 model year. Expect this trend to continue, especially if economies on both sides of the Atlantic don’t see a turnaround for a while.
Auto Makers Ready for 2011 Frankfurt Auto Show