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Financial Meltdown Talk Spooks European Car Buyers

Even Germany falters

But VW, Hyundai-Kia, BMW Seem Immune From Trouble

“this year’s loser’s league is made up of Peugeot-Citroen, Renault, Fiat and Toyota”

With newspapers and television news constantly talking about economic meltdown, double dip recession and great depressions, it’s not surprising that Europeans are getting a bit hesitant about buying new cars.

According to statistics from British newsletter Automotive Industry Data (AID), sales of new cars in Western Europe dipped 1.4 per cent last month to 980,000. But news from Germany was the most worrying.

Sales are shrinking fast in Germany, Europe’s biggest market accounting for around 25 per cent of sales. German sales rose 0.6 per in October after gaining eight per cent the month before, and rising 10.8 per cent in the nine-months to September.

Forecasters are slashing predictions for next year too, with LMC Automotive, formerly J.D.Power, saying 2012 sales will fall two per cent to 12.5 million, after predicting a 1.3 per cent fall for 2012 last month. LMC added that if Europe goes into recession sales could fall another 1.5 million in 2012.

This increasing weakness has been reflected in recent financial reports from many of Europe’s mass car makers, except Volkswagen of Germany. Ford of Europe reported a third quarter loss of $306 million after a $197 million loss in the same period of 2010. GM Europe and its Opel, Vauxhall and Chevrolet subsidiaries lost $292 million in the latest quarter, and abandoned its pledge to breakeven in 2011. Peugeot-Citroen of France warned investors that it would lose money in its auto business in the second half of 2011.

Mighty Volkswagen though reported huge profits in the third quarter and this points to what AID editor Peter Schmidt calls a “two-speed auto-industry car sales league”.

“Some leading carmakers have coped notably better than others with today’s fast-deteriorating conditions. In short, the small band of the upwardly mobile is led by Volkswagen Group, Hyundai-Kia (of Korea) and BMW,”  Schmidt said.

“By contrast, this year’s loser’s league is made up foremost of French carmakers Peugeot-Citroen and Renault, whose ten months West European car sales already trail last year’s corresponding 10 months levels by a respective 7.7 per cent and 9.4 per cent. That’s followed by both Fiat and Toyota, whose respective ten months sales are already 17 and 12 per cent adrift,” Schmidt said.

There is some good news though, at least for consumers, in all this negativity.  As buyers across Europe decide discretion is the better part of valour and put off buying new cars, dealers are frantically slashing prices and offering massive discounts to lure them in. In Britain, Citroen is running a TV advertising campaign offering free fuel for a year worth up to $2,400 and free insurance too.

Neil Winton – November 15, 2011

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