European car sales to reflect economic malaise

14 January 2010

BERLIN: European automakers could suffer sharp declines in domestic sales in 2010, due to the closure of government "cash for clunkers" initiatives.

The continuing after-effects of the global economic downturn, which pitched Europe's largest economies into their deepest recession for decades in 2008-09, could also hold down consumer demand for new vehicles.

Car sales have been bolstered by government stimulus initiatives launched in Germany, France and Britain last year.

The schemes offered state cash incentives for customers willing to trade in their old cars for a new model.

According to data from the European Automobile Manufacturers' Association, 15m vehicles were sold in Europe over January-November 2009, and 17m were sold over 2008.

Unemployment is predicted to remain high across the continent during 2010, while credit-crunched banks are forecast to maintain their restrictions on consumer lending.

This would impact on car loan availability and restrain demand in the property market, holding down house prices and leaving consumers feeling less wealthy.

At this week's North American International Auto Show, Nick Reilly, head of GM's European operations, sales in western Europe could be as low as 13m in 2010.

Meanwhile, Ford said sales in the 19 largest European nations would fall from 15.7m in 2009 to 13.5-14.5m.

In Germany, the continent's largest economy and car market, December car sales dropped to their lowest level for two decades, following the closure of the nation's scrappage scheme.

The government initiative is thought to have been responsible for a 23% uplift in car sales in 2009, according to data from JD Power & Associates.

Economic data from the nation's Federal Statistics Office show German GDP as a whole dropped by 5% last year.

John Fleming, ceo of Ford's European operations, commented: "Unemployment is still high, housing is still a problem.

"There is some confidence but it has to start translating into some real economic recovery before we see a strong recovery in the auto industry."

Data sourced from Dow Jones/Bloomberg; additional content by Warc staff