Historic Sales Slumps Ended With Powerful Upsurge; Not This One.
Investment bank Morgan Stanley may have raised its Western Europe sales forecast for 2013 from minus six per cent to minus four per cent, but any hopes that a strong rebound is on the cards were shot down by analysts.
According to Fitch Ratings, fragile consumer and corporate confidence plus continuing European economic weakness put paid to that kind of happy talk.
“The consensus view among manufacturers and industry observers is that there will be a rebound of new vehicle sales in Europe in the second half of 2013 after their poor start this year. Although Fitch Ratings also believes that a timid recovery is possible in late 2013, we expect sales to stay low in absolute terms compared with before the crisis, chiefly because of continuous weak consumer and corporate confidence, and the absence of concrete signs of economic recovery in the region,” Fitch analyst Emmanuel Bulle said in a report.
First increase in three years
The latest forecast from Morgan Stanley, delivered at the Automotive News Europe Congress, was the first increase in its estimates for three years. Morgan Stanley noted however that the conference was short on solutions on how to deal with $4 billion to €5 billion of annual losses by the mass market manufacturers in Europe, and it didn’t expect any action to slash more excess production capacity.
Volkswagen marketing chief Luca de Meo told the conference European car sales will stay stable for three or four more years, with no big rebound like in the past.
Standard & Poors added to the gloom with a report saying the eurozone economy remains stuck in its second recession in five years, although it may have hit bottom in the second quarter of 2013.
“While this would be welcome news, a meaningful recovery still appears some way off. (it) expects eurozone growth to slowly gain momentum from the final quarter of this year and into 2014,” S&P said in a report.
Meanwhile latest data shows Western Europe’s sales in May fell 5.7 per cent to a 20-year low.
IHS Auto analyst Carlos Da Silva agrees that the latest poor sales are likely to be the bottom of the trough. Does this mean a recovery is on the cards?
“Of course not,” said Da Silva.
Capacity cut required
Alix Partners said in a report that West European sales will remain flat until the end of the decade, as unemployment, reduced spending power and negative consumer trends keep buyers out of car showrooms. And that bodes ill for manufacturers in Europe which have already shut down plants because of overcapacity.
Alix Partners said by 2019, Europe will need to cut its total capacity by more than two million vehicles to reach a sustainable use level.
Neil Winton – July 1, 2013