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Despite Recent Surge, Europe’s 2010 Car Sales Set To Dive

Germany Expected To Slide More Than 25 Per Cent
Some Still Say Scrapping Didn’t Steal Sales

Car sales in Western Europe may have zoomed almost nine per cent in September, but this looks very much like the zenith of a shooting star about to return to earth.

According to forecaster J.D.Power, government scrapping incentives induced last month’s huge sales rise in Western Europe, but the overall trend is down, from the peak of 14.8 million in 2007 down to 11.96 million in 2010. This year’s sales are likely to fall 2.7 per cent to 13.19 million from 2008. Sales in 2009 were held up by mainly by the huge, €5 billion scrapping scheme in Germany, but this has now expired. Incentives in France and Britain are set to fade away in 2010.

“There are now some early signs, in Germany (Europe’s biggest market) that the car market is about to fall sharply in the post-scrappage-incentive environment,” said J.D.Power’s  Pete Kelly.

Kelly said the cash-for-clunkers incentives in Germany forced sales forward, so the net overall impact is likely to be neutral. He doesn’t expect the German government to extend the subsidy scheme.

Next year, Deutsche Bank expects German sales to fall 26 per cent to 2.8 million, France and Italy to fall five per cent to two million, and Britain should be down five per cent to 1.8 million.

Germany’s VW says pre-recession levels won’t be seen again until 2013 at the earliest.

Commerzbank said it believes worries about the impact of the ending of scrapping incentives has been overdone, and its researches show that the positive effects may be extended because auto companies have big backlogs of orders which may even keep production lines rolling well into the new year. When the scrapping impact finally fades away, the slack might be taken up by economic recovery.

Others say the scrapping incentives didn’t steal sales from the future, because they mainly brought new buyers to the market who in the past bought second hand cars when their clunkers looked like expiring.

But J.D.Power’s Kelly says nothing can stop the rot in 2010.

“The fall in German sales is the major factor underlying our expectation that West European car sales will fall by around nine per cent in 2010. Furthermore, in the absence of a substantive economic recovery in Western Europe in 2010, the chances of any markets coming to the rescue to offset the likely decline in Germany are relatively small,” Kelly said.

Neil Winton – October 15, 2009

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