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Geneva Car Show 2015 – Sentiment Boosted By Weak Euro, Oil Price.

Geneva Car Show 2015 – Sentiment Boosted By Weak Euro, Oil Price.

Sales Will Rise A Bit in 2015, But Pre-Crisis Highs Still Distant Dream.
More SUVs Will Be Good For Bottom Lines.
Exotic Sports Cars Will Keep Excitement High.

The Geneva Car Show will open its doors to the public as the European industry faces a stagnating car market in 2015, after last year’s first gain since the Great Recession started in 2009.

Cheap SUVs for the masses and expensive limousines and sports cars for the super rich vied for the spotlight at the show, while lower oil prices and the weak euro look like welcome allies to add some lustre to the European industry’s bottom line.

Family sized SUVs like the Renault Kadjar, Honda HR-V, Mazda CX-3 and Suzuki Vitara took a bow, along with a front-wheel drive BMW minivan, the 2-Series Gran Tourer. General Motors Europe’s Opel-Vauxhall subsidiary hopes its new little Karl-Viva city car will help plug the gap left by Chevrolet’s European withdrawal at the end of this year. Less affordable but guaranteed to excite the crowds will be the new Ferrari 488 GTB, the second generation Audi R8, the McLaren P1 GTR and 675LT, and the Aston Martin Vulcan. The new Mercedes-Maybach Pullman, will cost you around $1 million if you go for the bomb-proof version.

The increasing popularity of more profitable SUVs may help ease the pain of the weak market. Sales levels reached before the economic downturn are not expected to return any time soon. European Union sales peaked at 15.2 million before the crisis struck, and even by the end of this decade are likely to be a million a year less than that, according to industry analysts IHS Automotive.

Consensus this year points to an anaemic European sales gain of between two and four per cent. Last year Western European sales grew 4.8 per cent to 12.1 million.

Professor Ferdinand Dudenhoeffer from the Center for Automotive Research (CAR) at the University of Duisberg-Essen is on the optimistic side of the consensus, expecting a 3.7 per cent gain in Western Europe in 2015 to 12.57 million.

Low end
IHS Automotive is at the low end, pencilling in a 2.2 per cent gain to 12.87 million for the slightly bigger E.U. area.

IHS Auto analyst Carlos Da Silva says Quantitative Easing makes sense because it will stave off the biggest worry for Europe; deflation. There is still much pent-up demand to be tapped, but Da Silva warns that a lot of recent sales have been questionable.

“Although replacement demand is playing its part, a fair share is largely artificial, driven by manufacturers pushing metal through “easier” channels. This includes by manufacturers themselves with self-registrations, as well as dealers and rental companies,” Da Silva said.

In France, one in four cars was sold this way in January. In Germany it was 44 per cent of sales. But the recovery was real.

   “Yet we caution that the structure of the market is still quite shaky, current demand remaining too dependent on artificial support,” Da Silva said.

Europe’s economy is still failing to show strength after the long recession and unemployment remains high. The Organisation for Economic Cooperation and Development expects eurozone growth of just 1.4% in 2015. That’s an improvement over the 0.7% for 2014, but it’s well below what Europe should be achieving.

Morgan Stanley doesn’t expect this month’s QE by the European Central bank to have much of an impact.

Little QE impact
“We still do not expect a strong European demand recovery. Excluding Britain and Spain, car sales in other major European markets have shown little sign of life. As long as unemployment remains close to peak, we would not expect this to improve. And with major auto (manufacturers) already financing companies at well below one per cent, we anticipate little impact from QE,” said Morgan Stanley analyst Harald Hendrikse.

CAR’s Dudenhoeffer said the surge in SUVs is a big plus for manufacturers.

“In 2005 there 59 different SUV models on offer in Germany. By the end of 2015, the German car buyer could choose from nearly 90 different SUVs. Cheaper fuel and new models are whetting buyers appetite for SUVs. Manufacturers will have a hard time selling expensive electric cars in Germany and the world, while cheaper diesel will slow down alternative technology further,” Dudenhoeffer said.

Dudenhoeffer said the average price of a saloon in Germany in 2014 was close to the equivalent of $31,000, while the average SUV sold for nearly $37,500.

“Manufacturers make just over 1,360 euros ($1,543) profit per car, but at least 1,650 euros ($1,870) for an SUV,” he said.

The Geneva Car Show opened to the public March 5 through March 15.

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