Automotive News Europe - September 2011 - 10

AUTOMOTIVE NEWS EUROPE

MARKETS

SPECIAL

REPORT

WORST MAY BE TO COME
LUCA CIFERRI
lciferri@crain.com

Italy’s car market has yet to emerge from a four-year sales slide and the worst may be yet to ITALY come. In July, Italy’s budget deficit forced the government to slash expenditures by 70 billion euros, and the majority of those cuts will come in 2013 and 2104. With a stagnant economy coupled with a tax increase next year, Italian consumers will have even less disposable income, which may make a market rebound wishful thinking. Fiat Group CEO Sergio Marchionne has said industry sales will decline 8 percent to 1.8 million units this year, give or take 50,000 units – a result nearly as bad as in 1996, when sales bottomed out at 1.73 million. Italy’s car market has suffered a painful decline since 2007, when sales peaked at 2.5 million units. Scrappage incentives propped up the market for a while in 2009. But after those incentives lapsed, sales softened further to 2.0 million units last year. The extended downturn may claim casualties among Italy’s dealerships, said Filippo Pavan Bernacchi, president of Italian dealer group Federauto. “Italy lost almost 700,000 annual sales since its 2007 peak and the current sales pace is not sustainable for the dealer network,” Bernacchi said. Another issue is that it is hard to ascertain the true health of the market because of “self-

Fiat’s Sergio Marchionne predicts a bad year for Italy’s auto industry.

registered” vehicles that artificially inflate sales numbers. This has always been a problem in Italy, just as in other European countries, but the ploy is being used even more by dealers and automakers because of the economic slump. At the end of each month, dealers sometimes purchase their own cars to meet the automakers’ sales targets and qualify for bonuses. In a market as bad as this, some dealers need that bonus cash to stay in business. Some automakers force dealerships to selfregister cars, while other automakers register vehicles themselves to inflate their market share. There is no public data on self-registrations, but industry estimates range from 5 to 6 percent of total sales. This year, that would amount to 90,000 to 100,000 units. Another problem in the Italian market is the increasing volume of registrations in the last three business days of each month. This year, those last three days have generated 33 percent to 38 percent of total monthly sales, said Tommaso Tommasi, founder of

InterAuto-News, a trade newspaper that closely monitors Italian sales. That’s up from 2008 and 2009, when sales for that period totaled 31 percent of monthly deliveries. “Italians are internationally known for being last-minute people in everything they do, Tommasi noted. “But having been in this business for more than 50 years, I do not believe that one car out of three finds a buyer just at very end of each month.” Self-registrations, sales to daily rental fleets and sales to corporate fleets may total 600,000 units or so, Bernacchi said. If so, dealerships’ retail sales this year may total as few as 1.2 million units. Italy’s 3,800 dealerships can’t prosper with sales that low. “A volume like this is just killing the auto distribution sector,” Bernacchi said. Renault Italy CEO Jacques Bousquet, who is also the new president of the UNRAE, Italy’s association of foreign auto-makers, also projects sales of 1.8 million units. He predicts the market will remain extremely weak for another four or five years. Bousquet is calling on automakers, dealers and lawmakers to form a plan to boost annual sales to 2 million units. Even that wouldn’t return Italy’s auto industry to prosperity, since annual sales over the past decade have averaged 2.3 million units. “This is not a short-term crisis,” Bousquet said. “The Italian market is now structurally undersized to give the sector any chance to survive decently and to invest.” ■

MARKET REMAINS ‘AWFUL’
OLIVE KEOGH
autonewseurope@crain.com

Ireland’s car market has plunged into uncertain territory after the end of a scrappage IRELAND scheme that had buoyed sales for the previous 18 months. “The market reality is pretty awful,” said Eddie Murphy, managing director of Ford Ireland. “The economy remains very brittle, there is poor consumer confidence and organizations and individuals are cutting expenditure wherever possible.” Murphy said the industry expects new-car sales in Ireland to be between 85,000 and 90,000 units in 2012, but adds "this forecast carries a health warning.” Scrappage bonuses to encourage buyers to swap old cars for new models helped boost sales to 88,000 in 2010 after the market fell to just 58,000 in 2009. This compares with 186,540 in 2007 and 151,607 in 2008. After the incentives stopped in June, new-car sales fell 35 percent in July starting a downward

trend that is expected to continue for the rest of the year. The forecast for the full year is 100,000 units. The traditional big-selling brands in Ireland – Toyota, Volkswagen and Ford – continue to battle it out for market leadership, with Renault and Nissan completing the top five. Opel is in sixth place with virtually no growth in sales. Fiat, once a force in the Irish market, now has a market share of less than 1 percent. Low-cost brands such as Skoda, Hyundai and Kia have been steadily gaining ground in recent years. Skoda’s year-on-year sales are static, but Hyundai and Kia have continued to grow. BMW is the strongest performing luxury brand in Ireland with sales up 57 percent to the end of July while sales at Audi are up 24 percent. Toyota luxury-car subsidiary Lexus has increased its sales by 46 percent albeit from a much lower base. Saab, a very small player in Ireland, has seen its sales jump by 173 percent year on year to the end of July. Volvo’s sales for the same period are up

33 percent. The two luxury losers are Mercedes-Benz, down 7 percent, and Jaguar, down 47 percent. What growth there is has come from increased sales to the car rental sector and Industry expert Nolan is unsure a small recovery in fleet when Ireland sales. “The overall market can rebound. remains very fragile, and the months immediately following the ending of scrappage were always going to be challenging,” said Alan Nolan, director-general of the Society of the Irish Motor Industry. “There is still a big issue around lack of working capital for the industry and car finance for consumers. Until that eases and consumer confidence returns the market is going to remain difficult. We estimate that in a normal environment new-car sales of between 140,000 and 160,000 units a year would be about right for Ireland. The million dollar question is: When will things return to normal?” ■

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SEPTEMBER 2011
Automotive News Europe - September 2011

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