Stagnant European Recovery Forecasts Might Be Too Modest

Car Use Said To Be Rising, Used Car Supply Declining.
But Prices Threatened By Continued Oversupply.

The recovery in West Europe’s car sales might turn into something more impressive than the expected stagnating recovery from six years of weakness.

LMC Automotive raised its forecast for 2014 to an increase of three per cent, compared with its previous estimate of a 2.7 per cent rise a month earlier. IHS Automotive stuck with its prediction of a mild recovery of a mere two per cent – with sales inching ahead to 11.79 million in 2014 up from 2013’s 11.55 million.

Most excitable of all was Bernstein Research, now expecting a six per cent increase for all of Europe compared with its previous estimate of plus three per cent. Bernstein also raised its forecast for 2015 to six per cent growth from an earlier four per cent expectation.

Macquarie Equities Research went for a three per cent increase in Western Europe, but added that latest data from Germany suggests pricing is expected to remain challenging.

“This represents another proof in our view that the substantial overcapacity problem in Europe remains unresolved and as such incentives will stay at elevated levels,” Macquarie said.

Green Shoots
Bernstein, in a report called “Searching for Green Shoots” said among points which pointed to a likelihood of increasing sales was the extraordinary age of cars in Europe, the fact that car usage is increasing again, and the supply and availability of used cars is becoming problematic. Other positive points included –

• Falling new car prices
• Low interest rates and ever more generous financing deals
• Improving fuel economy making new cars cheaper to drive
• Rising maintenance costs on older cars

LMC Automotive, in its monthly report, pointed to progress in Germany to support its positive forecast.

“The German market appears somewhat stronger in the early months of 2014, it having disappointed last year as the total car market fell below 3.0 million. Selling rates so far this year have average over 3.1 million, with the economic backdrop looking supportive for solid full-year growth,” LMC Automotive said.