It might seem as if everything has been put on hold across Europe to make way for Brexit negotiations. From a UK perspective, it certainly looks that way, and the issue has taken up considerable time and effort on the part of European Union (EU) and European Commission (EC) leadership, their bureaucrats, the media and an increasingly confused British and European public.
For the UK market, the effects of Brexit uncertainty are plain to see: business confidence is low, impacting major investments; and consumer confidence is low, affecting large personal financial commitments such as new car and property purchases.
But Europe is a vast continent, taking in the 28 EU nations as well as the European Free Trade Area (EFTA) countries. Each has its own national challenges, in addition to the knock-on effects of geopolitical events such as Brexit.
This forecast of European vehicle demand has been compiled at a time of huge uncertainty over Brexit, fears of an escalation in global trade friction and fresh concerns over the exposure of the region’s banks to Italian debt, to name but a few current concerns
The weekly gilets jaunes protests in France may be reducing in numbers, but they continue, with the clashes between police and protestors creating global headlines and destroying property and confidence; expect further disruption in the weeks leading up to the European elections, as anti-European sentiment overlap with gilet jaune activity. On that note, it remains unclear how much weight to attribute to the Polish opposition party’s threats of a possible ‘polexit’, a topic revived in that country ahead of the May European Parliament elections.
In Germany, the departure of one of Europe’s leading figureheads, Angela Merkel, will mark the end of an era, but of greater concern for German consumers will be the impact of rising rent prices caused by a sharp hike in costs in the construction industry.
Spain, meanwhile, continues to struggle with the highest number of unemployed workers in the EU, and one of the highest poverty rates in the Eurozone. However, the country’s economy has, from 2017, grown back above its pre-credit crunch level in 2008 and in 2019 is expected to be the fastest-growing of the EU’s Top-5 economies for the 5th successive year.
Both the light and heavy vehicle sectors are expected to undergo cyclical declines over the next couple of years, but these are the ebbs and flows of mature markets, not a sign of markets in meltdown
Perhaps of greatest concern is Italy’s worsening banking and debt crises, the impacts of which will be felt across Europe should they remain unchecked. The country’s economy entered technical recession at the end of 2018, and the national debt, proportionally the highest in the euro zone after Greece, is continuing to rise. If Brexit is a major headache for Europe’s leaders, the Italian debt crisis has the potential to be a burst aneurysm.
Falling consumer confidence is not something any automaker wants to hear, but automotive industry stakeholders across the board are preparing for the impact of slowing economic growth across Europe—indeed, cracks appeared for the automotive industry in January when figures showed the first decline in the EU and EFTA car market since 2013. A new Automotive World report looks at the prospects for Europe’s light vehicle (LV, <3.5t) and heavy commercial vehicle (HV, >3.5t) sectors in 2019 and through to 2023, with the impacts of economic slowdown and complex geopolitical issues featuring heavily in the analysis.
“This forecast of European vehicle demand has been compiled at a time of huge uncertainty over Brexit, fears of an escalation in global trade friction and fresh concerns over the exposure of the region’s banks to Italian debt, to name but a few current concerns,” said Jonathan Storey, author of Automotive World’s European market outlook report, which covers 30 EU and EFTA markets.
If Brexit is a major headache for Europe’s leaders, the Italian debt crisis has the potential to be a burst aneurysm
“Against this background it is perhaps a little surprising that the current outlook for vehicle demand is fairly benign,” Storey continued. “While any of the mentioned issues, individually or in adverse combinations, has the potential to disrupt our forecasts, their impact at the time of writing is fairly marginal.”
But there is still potential, thanks to the longer-term benefits offered by the EU-Japan trade deal, and the fact that a downturn in the market was not unexpected. Indeed, Storey remains confident about the longer-term prospects for the Europe’s new vehicle market: “Both the light and heavy vehicle sectors are expected to undergo cyclical declines over the next couple of years, but these are the ebbs and flows of mature markets, not a sign of markets in meltdown.”
‘Europe’s new vehicle market: prospects to 2023’ anticipates minimal growth in the LV sector and a decline in the HV market, but with a return to growth in the final three years of the forecast.
Europe is the latest market to be covered in the ongoing Automotive World five-year market outlook series.
