Auto Sales In Europe Expected To Decline Sharply

Autoparts Report, Oct 8, 2001

European car sales will drop by 600,000 this year and slump by a further one million in 2002 before resuming a powerful uptrend in 2003, a recent report said. The report, published by World Markets Research Center, said sales had been expected to decline gently by around 200,000 in 2001 to 14.5 million. But because of the attack in the United States on September 11 and its shattering impact on consumer confidence, the World Markets Research Center said it has slashed a further 400,000 from its forecast for 2001.

Other market researchers and analysts have been scrambling to cut their car market forecasts. DRI-WEFA chopped another 300,000 vehicles or two percent more from its forecast for 2002. Previously it had expected sales of cars and light trucks to fall two percent in 2002.

Investment bank Credit Suisse First Boston cut its forecast for European car sales by five percent to 13.8 million for 2002.

The World Markets Research Center report forecasts sales of 14.1 million cars in 2001, 13.1 million in 2002, and a recovery to 14.2 million in 2003. This represents drops of four percent in 2001 and seven percent next year.

West European car sales hit a record 15.2 million in 1999. According to World Markets Research Center, this sales weakness will force the automotive business to reel in some expansion plans. "Within the automotive sector new investment is expected to be postponed along with new merger/acquisition activity, until the level of uncertainty is reduced," the World Markets Research Center said.

Weakness in U.S. markets would hit European car makers like BMW, Volvo, Volkswagen and Mercedes Benz, according to the World Markets Research Center. "The introduction of the euro (on January 1, 2002) could exert a further negative influence as it could be used to mask price rises in affected markets but further ahead, tax cuts and the expected removal of the Block Exemption regulations should exert an energizing influence," the report said. "Block exemption" rules allow car makers to opt out of EU monopoly laws, and expire in September 2002.

Many experts agree that although the European auto markets are on the slide, the fact that tax cuts are scheduled in many big economies like Germany, interest rates are in a downswing, and inflation is under control, augurs well for a quick turnaround.

Since the last big fall in sales in 1993, the industry has slimmed down staff and cut costs, but fat remains.