European Market To Remain Steady Despite Political Turmoil

European Market To Remain Steady Despite Political Turmoil.

British Prospects Fade, While France Looks Set For Shot In The Arm.

Could PSA/Opel Deal Be In Jeopardy?

“Meanwhile, the German election in September isn’t expected to bring any upsets. Just like the British election and the U.S. last November”

As the U.S. faces a potentially debilitating slowdown, European car sales forecasts point to steady growth despite election minefields which could undermine consumer confidence.

The British election is a threat to sales there because of currency volatility and weakened consumer confidence, said BMI Research.

“In the longer term, a shift in the UK’s position on Brexit negotiations will bring further uncertainty, although a softer stance should be ultimately positive for the industry,” BMI said.

The ruling Conservative Party lost its overall majority in Parliament in elections June 8, but seems poised to totter on with minority party support. 

Citi Research agrees.

“U.K. uncertainty is likely to push weakening auto sales lower still. A hung parliament begs the question – what next,” said Citi Research analyst Michael Tyndall.

The results of the first round of the French parliamentary election look positive for the auto industry, according to BMI.

“French President Emmanuel Macron’s La Republique En Marche …. will give him the mandate to push through reforms that we believe will bring much needed improvements to the competiveness of the country’s automotive industry,” BMI said in a report published before the first round June 11. The second round took place June 18.

On track
According to the Wall Street Journal, Macron’s first round performance means he is on track for a large majority.

A Macron regime promises labour and tax reform.

“Alongside the corporate tax cuts that were a central component of Macron’s presidential election campaign, the increased likelihood of pushing through labour reform with a majority in the National Assembly would strengthen our view of increased competiveness in vehicle production,” BMI said.

Meanwhile in Europe as a whole, LMC Automotive’s latest monthly report raised its estimate for Western European sales growth in 2017 to 2.9 per cent after its previous forecast of 2.4 per cent. LMC said economic data from the major markets remains generally positive, suggesting that full year growth for the region is a strong prospect.

The European Automobile Manufacturers Association raised its forecast for E.U. sales to 1.5 per cent to 2.0 per cent, up from its previous expectation of about a 1 per cent gain. Last year E.U sales totalled 14.6 million, the biggest in 9 years. But that is still about 6 per cent below the pre-crisis high in 2007.

Bernstein Research remains positive too.

Too bearish
“We believe this (negative) view is probably too bearish. Volumes remain fairly solid, pricing in Europe is strong and Euro macro-economic indicators look very positive. Cost headwinds this year – including raw materials – look manageable,” Bernstein Research analyst Max Warburton said.

BMI Research said the uncertainty generated by the British election result might jeopardise Peugeot’s deal to buy Opel-Vauxhall, scheduled to be completed next month, while other big investments might also be delayed.

Meanwhile, the German election in September isn’t expected to bring any upsets. Just like the British election and the U.S. one last November.