European car market faces prolonged slump until 2020, study says
Consultants forecast Western European new car sales will not return to pre-crisis levels before 2020, with demand still well below the 2007 peak.
European carmakers are facing at least seven more years of weak demand, with new research showing the region’s auto market will not recover to pre-crisis sales levels before 2020. The forecast, published in AlixPartners’ Global Automotive Outlook, points to ongoing economic problems and high unemployment as the main obstacles to a rebound in consumer confidence and car purchases across Western Europe.
Sales figures fall back to 1990s levels
According to the AlixPartners study, demand for new passenger cars and light commercial vehicles in Western Europe is expected to fall by one million units in 2013, reaching just 13.5 million. That is a drop of 3.3 million compared to the 2007 peak, and brings the market back to volumes last seen in 1994. The report states that industry sales are unlikely to reach 16 million units again before the end of the decade.
The downturn is visible across major markets. In July, new car sales in Spain were down 17%, Italy fell 21% and France dropped 7% year-on-year. Even Germany, which had been relatively insulated from the worst of the eurozone crisis, posted a 5% decline. Premium brands were hit hard, with Mercedes-Benz down 14.6%, BMW down 17.9% and Volkswagen down 1.5% over the same period.
Impact on manufacturers and jobs
Manufacturers heavily exposed to the European market are already reporting heavy losses. PSA Peugeot Citroën posted an €819 million loss for the first half of 2012. Several carmakers have begun shifting focus to emerging markets or expanding their used car operations to offset weak new vehicle demand in Europe. Persistent overcapacity in European plants remains a concern, and analysts have suggested that only a sustained recovery in demand or further restructuring will relieve pressure on jobs and margins.
The report’s outlook contrasts sharply with growth forecasts for other regions, including China and Brazil, where sales are expected to rise. European brands with global operations may weather the downturn better than those reliant on their home market. For more on how European manufacturers are responding to these challenges, seeVolkswagen Gains Ground in Europe as Opel and Peugeot Face Losses.
No quick recovery expected
The AlixPartners study leaves little doubt about the scale of the challenge for the European car industry. With sales at their lowest in nearly two decades and little sign of a rapid turnaround, manufacturers face a prolonged period of adaptation. The market’s eventual recovery to pre-crisis levels is now not expected before 2020, making it one of the slowest rebounds among major global regions.
