Automotive News Europe - September 2011 - 8

AUTOMOTIVE NEWS EUROPE

MARKETS

SPECIAL

REPORT

KEEP THE CHAMPAGNE ON ICE
Europe’s automakers enjoy boom times abroad, but problems pile up at home
PAUL McVEIGH
pmcveigh@crain.com

urope’s debt crisis has dampened hopes that the region’s car market will emerge quickly from the economic downturn of the past three years. The crisis is creating a two-tier Europe with some markets in northern Europe escaping the market downturn while others are in a steep free-fall. In Germany, for example, vehicle sales are expected to be exceed 3.1 million this year because of a buoyant economy, while in Greece, “the market has virtually disappeared,” according to BMW sales and marketing boss Ian Robertson. The trouble is spreading. Stephen Odell, Ford of Europe CEO, said: “We are seeing

not only Greece and Portugal, but also Italy, France, Spain and the UK slowing down from the effects of sovereign debt concerns and austerity packages.” There is little optimism that the economies of debt-hit countries will bounce back quickly. “This is not a short-term crisis. The Italian market is now too structurally undersized to give the sector any chance to survive decently and to invest,” Renault Italy CEO Jacques Bousquet said. In a study, Ferdinand Dudenhoeffer, who heads Duisberg-Essen University’s center for automotive research, said German automakers like Volkswagen, BMW and Daimler shouldn’t allow their growing volume in booming markets such as China, India and

Brazil to distract them from what is happening at home. His warning also applies to French automakers Renault and PSA/ Peugeot-Citroen, which, though they both posted record first-half unit sales on growth in emerging markets, still rely on Europe for most of their volume. The western European auto market may be in line for a long recession if the debt crisis worsens, Dudenhoeffer said, adding “the auto industry’s champagne mood shouldn’t be allowed to hide those issues.” Automotive News Europe looks at the effect of the crisis on some of Europe’s worst-hit markets – UK (below); Italy and Ireland (Page 10); Greece, Spain and Portugal (Page 12).

BOOMING SALES A LONG WAY OFF
NICK GIBBS
autonewseurope@crain.com

Industry watchers say it will be a long time before the UK market returns to the heady days of a UK decade ago when new-car sales broke records three years in a row. Sales peaked at 2.6 million in 2003 as the country basked in economic good fortune. But as austerity measures bite and buyers find it difficult to obtain car loans, forecasters expect a tough few years. “It’s difficult to see an upside scenario to the UK market in the near term,” said Jonathon Poskitt, head of European sales forecasting for J.D. Power Automotive Forecasting. The easy credit that fueled the growth in private car sales has gone. The percentage of new cars sold to private buyers in the UK has dropped to 42 percent from 56 percent last year. There has been a corresponding rise in less profitable fleet sales to 58 percent from 44 percent. “When the market was at

2.6 million, credit was easy and the mentality was to borrow to buy a car,” Poskitt said. “The question is whether we can ever get back to that level of lending.” This year, sales will be 1.9 million, rising to 2 million in 2012, predicts the Society of Motor Manufacturers and Traders. That’s optimistic, reckons J.D. Power, which sees sales of 1.8 million next year. Ford, Vauxhall doing OK GM Europe President Nick Reilly said pricing pressure is an issue. “No one wants to pay more for a car, so it’s a quite a difficult market for every manufacturer and I don’t anticipate it’s going to improve for a couple of years.” GM’s Vauxhall brand, which is the UK’s No. 2 seller, and Ford, the country’s top-selling marque, are in a good position to ride out the storm, Poskitt said. “Their model range is quite young and they are traditionally the brands that sell well. We expect that to continue,” Poskitt said. Premium brands as well as Hyundai and Kia have bucked the downturn to significantly grow market share and they are expected to continue to do well. Hyundai and Kia have focused on European

“It’s quite a difficult market and I don’t anticipate it’s going to improve for a couple years.” NICK REILLY, GM EUROPE PRESIDENT
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customers and started to plug holes in their portfolio. Michael Cole, managing director of Kia Motors UK, said the brand’s new products and a move away from a budget-priceled position to one of good design and great quality, is helping the brand. “It’s clear that the British market remains suppressed by local, regional and global economic conditions. However, we expect to continue to grow our market share and we want to get to around 4 percent to 4.5 percent over the next few years,” he said. Kia has tripled its UK market share to 3 percent since 2003. Hyundai’s share also increased threefold, to 3.4 percent, in the same period. The Korean brands’ growth is mainly at the expense of French automakers. French brands have all seen big falls in market share, with Renault’s share tumbling to 4.7 percent from 7.3 percent in 2003. Peugeot’s share dropped to 5.4 percent in the same period from 7.2 percent, while Citroen’s share is down to 3.5 percent from 4.6 percent. Industry observers expect that poor economic conditions will have a negative effect for years to come. J.D. Power predicts 2.5 million annual sales by 2018. Said Poskitt: “Consumer confidence is very weak and inflation is running high. The Bank of England can’t stamp down on inflation because growth is so weak that it risks putting the economy back into recession. We’re expecting a long road back.” ■

SEPTEMBER 2011

Automotive News Europe - September 2011

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