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Europe Sales Outlook Bleak, With No Strong Rally In Sight

“A recovery in new car sales in Europe back to pre-crisis levels could take until the end of the decade, if it can be achieved at all”

Ghosn Calls For  German-Style Shake-Up In France, Italy, Spain

Gloomy sales projections are not only pointing to sluggish near-term conditions in Western Europe, but also to a long-term lethargy that promises a harsh future for the most vulnerable manufacturers.

In a speech to the University of Duisberg-Essen’s Center for Automotive Research (CAR) conference, Renault-Nissan CEO Carlos Ghosn said the European auto market is unlikely to recover before 2020 unless European governments like Italy, Spain and France follow Germany’s lead by introducing supply side reforms which would shake up rigid labour laws.

“(if this doesn’t happen) I see stagnation for a very long time,” Ghosn told the conference.

Fitch Ratings doubted if sales will ever return to recent highs.

“A recovery in new car sales in Europe back to pre-crisis levels could take until the end of the decade, if it can be achieved at all,” said Fitch Ratings analyst Emmanuel Bulle in a report.

“Our current base case assumes new vehicle sales to decline by approximately three per cent in western Europe in 2013. This would mean a 23 per cent fall since 2007. Structural factors and anecdotal evidence make it uncertain that sales will return to the 1999 peak of 15.1 million units. They suggest that European recovery will be slow at best and could follow the path of Japan, where vehicle sales have fluctuated since 1998 at 25 to 45 per cent below their peak in 1990,” Bulle said.

“Owners are keeping vehicles, which are increasingly reliable and robust, for longer and are driving shorter distances. At the same time, the total cost of vehicle ownership has increased and several large cities or countries have taken measures to limit or deter car use. Periodic surveys have also show a declining interest in cars from the younger generation. Cyclical factors, including weak consumer and corporate confidence, high employment, and tighter credit are making matters worse,” Bulle said.

German rebound
LMC Automotive’s projection for 2013 car sales in Western Europe is a drop of between two and five per cent. CAR data suggests a decline to 12.07 million in 2013 rising to 12.61 million in 2014. According to the European Car Manufactures Association ACEA, E.U and EFTA car sales fell 7.8 per cent to 12.53 million in 2012, the lowest since 1995.

A recent survey from European purchasing executives pointed to a rebound in Germany in 2013, but expected economic activity in France and other members of the euro zone to plunge this year. The PMI euro zone purchasing managers survey suggest euro-zone GDP will fall nearly one per cent in the first quarter at an annual rate, according to Nomura International.

Ford Europe and Fiat Europe have already reported heavy losses for 2012 and expect much of the same in 2013. GM Europe, Peugeot-Citroen, and Renault’s financial results for 2012 are likely to make for gruesome reading. VW, and its BMW and Mercedes compatriots will be comfortably in the black, although profit growth is likely to have slowed. If overall sales conditions don’t improve, the long-awaited shake-out can’t be long delayed.

Neil Winton – February 1, 2013

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