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AW Monthly – Issue 5 / April 2013

Anyone who thought they’d seen light at the end of the long dark tunnel of European car sales will by now have realised it was a high speed train coming the other way: “There is no light at the end of the tunnel for car manufacturers as car sales continue to freefall in Europe,” said KPMG’s UK Head of Automotive, John Leech.

The latest registration data released by ACEA shows new car demand in the EU declining by almost 10% year-on-year in the first quarter. March 2013 turned out to be the 18th consecutive month of falling sales, down 10.2% year-on-year.

Even the German new car market suffered, declining 17.1% in March, and 12.9% year-on-year in the first quarter. The UK market, however, continues to outperform Europe, growing by 5.9% in March, thanks to heavy discounting. “The UK performance is even more remarkable given that the Euro has weakened by 10% compared to Sterling in the last 6 months, meaning that it is 10% less profitable for European carmakers to sell cars in the UK compared to six months ago,” commented Leech. “However, at the moment the UK is the ‘only show in town’ for carmakers who remain happy to support the UK market with discounts at historically high levels”. The UK’s dynamic new car market presents opportunities to increase not just volumes, but also market share; Kia’s UK President and Chief Executive, Paul Philpott, recently said he foresees Kia breaching the 100,000 annual sales mark in the UK within five to seven years, which would see it break into that country’s top five brands.

Ernst & Young anticipates 2013 European car sales declining by 5-7% compared to 2012, already the worst year for EU car sales in almost two decades. Referring to specific European markets, Peter Fuss, senior advisory partner at the Ernst & Young Global Automotive Center, said “We expect the French, Italian and Spanish markets to continue their decline over the rest of the year in the absence of any major government intervention to encourage vehicle buying or replacement.”

As the crisis in the European automotive industry deepens, the plight of the European OEMs worsens, especially in what Ian Henry of AutoAnalysis refers to as the ‘squeezed middle’. Whilst Kia looks to increase sales and market share thanks to improved design and brand perception, those in the traditional mass market continue to suffer. Last week, Moody’s added to the pressure on PSA already applied by S&P and Fitch by downgrading the company to B1, four levels below investment grade.

Opel/Vauxhall also continues to struggle, so it was refreshing to see GM support its commitment to Europe with hard cash, but at the other side of the squeezed middle is Daimler, which has said it may have to reassess its 2013 targets following a disappointing first quarter.

Europe’s continued suffering comes as little surprise to most industry watchers, however, but it contrasts interestingly with the current performance of the BRIC markets, where many OEMs are looking to offset their European woes. The end of March represented the end of India’s fiscal year, and with it the first time in a decade that passenger car sales in India declined year-on-year for a full financial year. At the other end of the scale is China, where the passenger vehicle market posted the third-highest monthly growth in a year in March 2013. Such positive news should make for an interesting Shanghai auto show.

Meanwhile, in Europe, we can look forward to a 2013 that KPMG’s John Leech says “…is already shaping up to be the seventh straight year of falling car sales in Europe.”

We hope you enjoy this issue of AW Monthly, and as always, we welcome your thoughts and suggestions; email us at editorial@automotiveworld.com

Martin Kahl
Editor, Automotive World

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