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Sales Forecasts for Western Europe Under Pressure Again

Relentless Round Of Bad News Spooks Buyers

What If There Is A Major Crisis, Not A Smooth Decline?

“This base forecast does not, however, assume disorderly defaults in eurozone countries’ debts; if that were to happen, a much more severe drop in the car market would be unavoidable”

Another European summit meeting to save the beleaguered euro, and another round of lower forecasts for car sales. With the media full of reports that maybe a double dip recession will hit Europe, or is already upon it with all the ramifications for unemployment and economic failure, it’s not surprising that would-be car buyers are waiting for fairer weather before making such a big purchase.

Car sales in Western Europe dipped around four per cent in November, and L.M.C Automotive (formerly J.D.Power) now says sales in Western Europe will fall 5.1 per cent in 2012 to 12.15 million, and this after saying last month that the decline next year would be a barely perceptible 1.5 per cent. Morgan Stanley cut its forecast to a fall of 6.5 per cent. Deutsche Bank’s latest analysis calls for sales next year of 12.0 million, a cut of about six per cent from its previous forecast. Some analysts fear sales may dive much further if the euro zone unravels.

Industry forecaster IHS Automotive said Germany, Europe’s biggest car market, is losing momentum.

Real downward pressure
“The eurozone crisis looks as though it is starting to put real downward pressure on the Western European passenger car market. Germany had previously posted robust double-digit growth in the early part of the year as a result of a relatively low base comparison and the strong performance of its economy, despite the obvious difficulties in other Eurozone economies,” IHS analyst Tim Urquhart said in a report.

“However, it appears that the relentless negative news and economic data that is emerging from those distressed economies, and the fact that Germany is inevitably set to play the key role in saving the Eurozone, means that confidence has gradually ebbed away leading to slowing sales growth in Europe’s biggest passenger car market,” Urquhart said.

France is now seen by some as the weakest market next year.

“With two support mechanisms slated for removal (scrappage carryover and reduced bonuses for low-emitting cars), along with steep increases in company car taxation, France represents a major volume risk, with a possible eight per cent decrease to little more than two million units (in 2012),” said Price Waterhouse Coopers’ Autofacts analysis.

LMC said it had downgraded its forecast because the outlook for economic growth continued to deteriorate and a mild economic recession now looked likely. But it also warned that a much more deadly scenario was possible.

Mild economic recession?
“This market forecast takes into account a mild economic recession next year. This base forecast does not, however, assume disorderly defaults in eurozone countries’ debts; if that were to happen, a much more severe drop in the car market would be unavoidable,” LMC Automotive analyst Jonathan Poskitt said.

Neil Winton – December 15, 2011

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