Damped by soaring energy prices, rising interest rates, economic sluggishness and social turmoil, consumer demand for new cars and commercial vehicles remained at an all-time high in 2005. Buyers seemingly only momentarily paused to consider negative factors before making their purchases.

Auto makers responded by churning out a record 65,751,000 vehicles, marking the third consecutive production record, albeit one in which growth slowed to 3.2% over the 63,717,000 vehicles built in 2004 – itself a 5.3% increase from then-record 60,482,000 assemblies in 2003. The total included 44,113,000 cars and a record 21,638,000 commercial vehicles in 2005, compared with 42,495,000 cars and 21,222,000 CVs in 2004.

Related document: The World�s Top 10 Vehicle Producing Countries

While much of the vehicle-output increase came from auto makers in China and other developing markets, mostly at the expense of mature producer countries, there were no changes in rank among the top 10 producing countries, except that South Korea jumped ahead of France into the No.5 spot.

Vehicle output in the Asia/Pacific region rose 7.2% in 2005. While that was lower than the 8.5% rate posted in 2004.

That was enough to maintain the region’s world output leadership at 38.6% on the strength of a record 25,396,000 assemblies, compared with a 37.2% share in 2004, when 23,691,000 vehicles were built.

Japan Output Up 2.7%

In Japan, a continued economic recovery and higher export volumes boosted output by 2.7% in 2005 to 10,800,000 units from 10,512,000 in 2004.

However, repeated efforts to cool China’s super-heated economy amid continued criticism of its trade practices and monetary exchange rate policies appeared to have only a minimal effect as new investment brought additional output capacity, some of it aimed at establishing China as a future vehicle exporter.

Production of cars and trucks in China reached a record 5,708,000 units in 2005. While that was a smaller 12.6% increase compared with 14.1% in 2004, it was the second-highest growth rate for any country in the region, trailing only the 16.3% gain in much-smaller South Africa. Although China only exported a very small number of poorly performing SUVs to certain European markets in 2005, an export push was in the cards in the not too distant future. Chinese auto makers began stepping up the quality of their vehicles in preparation for entering some the of the world’s larger markets, including the U.S., within a decade. New investment by major Japanese auto makers in their China operations also was expected to put pressure on developing export markets to absorb capacity beyond that needed to meet rising local demand.

South Korea experienced slower growth, as well, in 2005. Still, a 6.6% gain (vs. 9.2% in 2004) pushed output to a record 3,699,000 vehicles, up from the prior-year record of 3,469,000.

In India, growth slowed sharply to 8.7% in 2005 from 30.1% in 2004, although output reached a new high of 1,642,000 compared with the prior year’s 1,511,171 units. Growing affluence was expected to keep demand strong.

On the other hand, output in Western Europe fell 2.6% in 2005 – the only region to suffer a decline – following a weak 0.3% rise in 2004.

Amid high anxiety over proposed cuts and changes in social programs and employment rules, most West European countries built fewer vehicles in 2005, ranging from a 27% drop in the tiny Netherlands industry (to 180,600 units) to Italy’s 9.1% decline that actually was an improvement from a 13.6% drop in 2004. Western Europe’s share of world output fell to 25.5% from 27.0% in 2004.

Eastern/Central Europe Rose 2.2%

The only “gainers” were Austria, Belgium and Germany. Despite the attention focused on Germany’s high labor costs and resistance to work-rule changes, auto plants there built 5,758,000 vehicles in 2005, up 3.4% from the 5,570,000 turned out in 2004.

When West German workers balked at rule changes and pay cuts, most often manufacturers threatened to move output to lower-cost countries in Central and Eastern Europe.

There, output rose 7.2% in 2005 and all countries, except the economically problematic Russia, posted gains. The increases ranged from 34.9% in Czech Republic, where a record 604,900 units were built, to a 3.4% gain to a record 612,000 vehicles in Poland.

Collectively, countries in the Eastern/Central Europe region accounted for 6.7% of world output in 2005, up from 6.4% in 2004, despite Russia’s 2.5% decline to 1,353,000 units.

Production in North America edged ahead 0.6% to 16,349,000 in 2005 from 16,254,000 in 2004. While the increase was higher than 2004’s meager 0.1% gain, stronger increases elsewhere reduced the region’s share of world output to 24.9% from 25.5% in 2004.

That North America posted an increase at all was due to an 8.3% gain in Mexico. Relatively strong home-market demand, plus new export opportunities, boosted production to a record 1,684,000 cars and commercial vehicles in 2005 from 1,555,000 in 2004. Increased imports and lower demand for traditional domestic nameplates in the U.S. and Canada were responsible for output declines of 0.1% and 0.9%, respectively, despite increased activity at transplant facilities.

Meanwhile, production in South America rose for a second straight year, following a sharp decline in 2003. While the 15.3% increase to 2,848,000 assemblies in 2005 was far less than the prior year’s 23.8% gain, the 2004 increase was based on a depressed market the prior year. Widespread availability of vehicles running on lower-price sugarcane ethanol drew a record number of Brazilian buyers to showrooms in the face of soaring gasoline prices. New export markets also helped propel Brazil to a 14.4% gain in 2005, while the much smaller Argentine industry mustered a 22.8% increase.

abinder@wardsauto.com