There has been a large positive shift in the demand for high-end cars, and no one does high-end cars like Germany. Mercedes, Audi, BMW, and Porsche control close to 80% of the market for these superior cars.
In the past few years there has been a large increase in the amount German auto makers have invested in car factories over seas. An article from the Dow Jones Company titled, German Luxury Car Makers look beyond Home Market by William Boston and Neal Boudette, explain why they are investing so much on factories outside of Germany. Production abroad swelled to 134% since 2000, while German car factory production only grew 6%.
This is largely to keep up with current and growing demand they need to invest in the major growth markets in the U.S. and China. By building in different counties with a variation of currencies they are also protecting themselves from currency changes. China and the US are important because the US is the biggest car market by value and China is the biggest car market by volume. Car sales expected to rise 7% in China, 3% in the US and stay nearly flat in Western Europe. Due to the trade restrictions set up by the Chinese, the only way to keep up with demand in China was for the auto company’s to manufacture in China. While with the US, German car companies encounter a lower manufacturing cost and can then export the cars.
The Germany auto companies have large plans for investment so far. Daimler, signed an agreement to invest $1.38 billion, to more than double production at its Chinese joint venture, Beijing Benz Automotive Co. (BBAC), part of their 4 million euro plan to invest in BBAC. While BMW revealed their $1billion expansion of the company’s U.S. plant, creating more than 800 jobs.
The article out of The Wall Street Journal titled Porsche’s 2013 Operating Profit Nearly Matched VW’s also written by William Boston talks about the major risk factors for the German auto companies to consider being the uncertain outcome of the Ukraine crisis, and currency risks. Ukraine is still fragile global economic system in recovery, this paired with punishing economic sanctions against Russia arouses fears that Europe’s economic recovery could be slowing to a standstill.
The currency risk, especially in some emerging markets is something worth thinking about for the auto companies. Last year VW reported that the exchange rate swings cut sales 4.6 billion euro, and this year it is expected to be around still around 1 billion euro.
Whiskey
Coillmór Bavarian Single Malt
Like the high-end car companies, this high-end whiskey is come from southern Germany, or Bavaria, in the Bavarian Forest. Coillmór Bavarian Svingle Malt Whisky is from the Bavarian Forest Bärwurzerei specialty distillery Gerhard Liebl. This Bavarian single malt has won a silver metal and three gold metals. Keep an eye out for imports of this luxury product.
A Dram for Your Thoughts 