Volkswagen Gains Ground in Europe as Opel and Peugeot Face Losses
Volkswagen is increasing its European market share in 2012 while Opel and PSA Peugeot Citroën struggle with mounting losses and state intervention.
Volkswagen is set to finish 2012 with a European market share near 24%, according to industry analysts, as rivals Opel and PSA Peugeot Citroën face mounting losses and the prospect of further state intervention. The German group has continued to expand its presence in a shrinking market, while its French and American-backed competitors struggle to stem financial losses.
VW's resilience in a declining market
LMC Automotive forecasts that car sales in Western Europe will fall by 8% in 2012 and contract a further 4% in 2013, reflecting weak consumer demand and economic uncertainty. Despite this, Volkswagen has managed to increase its market share, taking advantage of its broad product range and strong brand position. Analysts at Bernstein Research predict that by 2020, VW could command up to a third of the European market if current trends continue.
The group’s ability to maintain profitability and invest in new models contrasts with the situation at Opel and PSA Peugeot Citroën. Both companies are forecast to report substantial operating losses for 2012, with PSA accounting for almost $2 billion of the sector’s estimated $8 billion in total losses. The pressure has led to speculation about plant closures, job cuts and the need for external support.
State support and restructuring at PSA and Opel
In 2012, the French government stepped in to support PSA Peugeot Citroën with €7.2 billion in guarantees, following earlier bailouts for both PSA and Renault in 2009. The latest rescue package included conditions such as granting the government a seat on the company’s board. Despite the injection of funds, PSA has so far avoided the scale of restructuring seen at German rivals, choosing instead to use state support to sustain operations through the downturn.
Opel, General Motors’ European arm, has also struggled to return to profitability. The company faces tough competition in its core markets and has yet to announce a clear path to recovery. Industry analysts warn that without further cost-cutting or a rebound in demand, Opel and PSA could be forced to retrench or seek additional state aid. The possibility of nationalisation or deeper restructuring remains on the table if losses continue into 2013.
Market outlook for European carmakers
With demand in Western Europe expected to remain weak into 2013, the outlook for volume manufacturers remains uncertain. Volkswagen’s ability to grow its share highlights the gap between the strongest and weakest players. For PSA and Opel, the coming year is likely to bring further pressure to cut costs and streamline operations, while governments weigh the risks and benefits of further intervention.
