The 2008 credit crisis was a big wake-up call for everyone, and although the North American automotive industry has been on an upward trajectory, sales are still below pre-crises levels. The global automotive industry is faring better. Even so, just when we thought things would get better from 2010 onwards, Greece slaps us in the face, which is to say we are not out of the muck yet.
As small as Greece may be geopolitically, a debt default by the tiny Mediterranean country has implications for the whole of Europe and, thus, the whole world. If Greece defaults, chances are several other financially suspect European countries will also default, with the effects likely cumulating into something larger than 2008 credit crisis. Sadly, several key analysts believe a Greek default to be inevitable.
What does this mean for the global auto industry? With ambitious Volkswagen aiming to be the largest automaker in the next five years, with Toyota and Honda still recovering from the effects of the Japanese earthquake and with GM and Chrysler just gaining momentum after taking a beating from the last crisis, no one can afford to rest easy with a new threat just around the corner. Every single automaker needs to be prepared for another shock, otherwise they will be in for another rude awakening.
As depressing as things may seem, it is not all gloom and doom. A big lesson that the 2008 crisis thought the industry is that automakers need to diversify, with particular emphasis on emerging markets. The crisis hit the U.S. the hardest, and as one can imagine, the companies that suffered the most were those that relied on the region for a significant portion of their sales and profits — the American and Japanese automakers. In comparison, Volkswagen is not as dependent on the North American market, being the small player that it is. Buoyed by its immense operations in China, the company fared better than most. However, being the biggest player in the strongly impacted European market meant it still took a hit.
Unfortunately for Volkswagen and the other European automakers, the next crisis will be centered around Europe. Ford and GM, two non-European companies that hold large market share in the region, also have to be extra worried. Although there will be setbacks, this should not detract automakers from planning for growth in emerging markets. Such markets will likely be their saving grace. Even so, these efforts will be largely directed by changes in the global economy, as always.
Though the global auto market is still going strong, this situation would likely change if things only get worse. Not only will the next crisis — if it comes — be more severe, it will make 2008 look like a mild recession. No automaker will be immune.