European car makers expect slow recovery

Tuesday 10 September 2013 10.47
Volkswagen said it was aiming to sell 200,000 more cars in Europe this year than in 2012
Volkswagen said it was aiming to sell 200,000 more cars in Europe this year than in 2012

Europe's car market is bottoming out after five years of falling demand, but high unemployment and weak bank lending suggest its recovery will be long and slow, executives at the Frankfurt car show said.

Automakers have been hammered by Europe's prolonged economic downturn, with sales falling sharply and profits suffering even more because of overcapacity.

However broad signs of stabilisation - even in some of the region's hardest hit economies like Italy and Spain - are raising hopes that better times are on the way.

"The European market has bottomed out. It now appears to be stabilizing at a very low level," Volkswagen sales chief Christian Klingler said, pointing to evidence from the group's order books and feedback from dealers.

"A recovery will take some time and depend on the economic and political environment," he cautioned.

"Don't forget that unemployment is at the highest level in a long time. Banks don't always offer loans that are favourable to industry."

Rupert Stadler, chief executive of VW luxury brand Audi added it could take another one or two years before the European car market recovery picked up speed.

Other manufacturers struck a similarly cautious tone.

Europe should "see the end of the tunnel next year," Carlos Ghosn, the head of Renault and Nissan Motors, told Les Echos newspaper.

He predicted global auto market growth of just 1.5% this year, half of what Renault was forecasting in April.

Maxime Picat, the brand head of French carmaker PSA Peugeot Citroen, also forecast a gradual market recovery in Europe next year.

While all carmakers have suffered, the pain has not been evenly spread: German manufacturers VW, BMW and Daimler have benefited from their strength in faster-growing North American and Asian markets, as well as more robust demand for premium models.

That has allowed them to invest more heavily than rivals with greater exposure to southern Europe, such as Peugeot, Renault and Fiat.

The fruits of that spending were on show in Frankfurt this week, with a raft of new German models on the stands.

VW, Europe's biggest carmaker, said it was aiming to sell 9.5 million cars this year, up from 9.3 million in 2012 - helping to push its shares around 2.5% higher in early trading.