Healthy Europe Forecasts Under Pressure; Some Now Negative.
ACEA Sees 1 Per Cent Growth Only, Seeks E.U. CO2 Mitigation.
Used Car Weakness About To Undermine Market, Bank Says.
“We must therefore maximise efforts to safeguard our industry’s competitiveness” – Tavares
Forecasts for European car sales this year are being hurriedly cut back, and the consensus for modest growth less than a month ago is being replaced by a grim realisation the market may go into reverse.
Early this year the forecasts for Europe ranged from plus 4 per cent to plus close to 1 per cent, but now some expectations reckon on a 2 per cent fall, although LMC Automotive still sees Western Europe sales gaining 1.6 per cent.
The European Automobile Manufacturer’s Association (ACEA) now expects 1 per cent growth for Europe as a whole, with worries about Brexit underlining the fragility of the recovery. ACEA also pleaded with the E.U to dilute its harsh CO2 rules.
Nothing concrete has changed for the European economy, but the stock market crash followed by a hair-raising recovery and roller-coaster ride, can’t have induced much confidence.
Berenberg Bank of Hamburg is currently the most negative, now seeing a fall of 2 per cent for Europe as a whole, and said a crucial and often unnoticed element in the support of recent market health is crumbling – the used car market.
Berenberg analyst Alexander Haissl said apart from low interest rates, highly favourable supply and demand dynamics in the used car market have been the key driver in new car sales since 2014.
Used car problem
“Warning signs in the form of weakening domestic used car volumes in Germany, France and Italy, as well as a meaningful deterioration in key export markets like Poland, have already started to crystallise over the last few months. Used car inventories in Germany are on the rise, which underpins the beginning of a market imbalance, in our view,” Haissl said.
LMC Automotive still, grudgingly, retains its positive forecast for Western Europe.
“Overall, we are still forecasting a slowdown of growth in 2018 as a whole. Notwithstanding exceptionally strong results in some markets in January, there is still limited scope for growth in Germany, and a relatively weak U.K. market will constrain regional growth to around 1.6 per cent,” LMC analyst Jonathon Poskitt said.
ACEA forecast growth will slow to 1 per cent in the European Union in 2018 after 2017’’s 3.4 per cent gain.
At the same Carlos Tavares, ACEA President and PSA Group CEO, warned about the impact of overly heavy and prescriptive CO2 regulation.
“The European automobile industry is on a pathway to recovery, finally coming close to pre-crisis sales and production figures after a full decade. But in light of major E.U. legislation ahead of us, notably new CO2 targets for cars and vans as well as the threat of Brexit, this recovery is fragile. We must therefore maximise efforts to safeguard our industry’s competitiveness,” Tavares said.
More time please, says Tavare
Tavares said legislators should set targets, but not try and force the industry to embrace battery electric vehicles. The decline of diesel posed a threat to E.U. targets for 2021. Tavares wanted more time for the industry to adapt to the CO2 rules.
“ACEA is therefore calling for an ambitious yet realistic approach to future CO2 reductions. This should include a well-balanced plan for a gradual shift to low and zero emissions vehicles, limiting the direct impact on the competitiveness of the European automotive industry,” Tavares said.
BMI Research didn’t mess with its rosy forecast for 2018 and its expectation of 3.7 per cent growth in Western Europe. And it had some warm words about Europe as a whole.
“Europe remains the best-performing region as measured by our latest Autos Sales Risk/Reward Index, due mainly to its high industry and country rewards as well as low industry risks when compared to other regions. Western European countries (79 per cent of Europe sales) are home to the healthiest markets in terms of competition and vehicle ownership rates, while Eastern European markets are becoming increasingly attractive for those seeking promising growth opportunities,” BMI said in a report.