CSM Worldwide Says Europe Faces Third Consecutive Year of Falling Auto Sales

LONDON, January 27 --

CSM Worldwide, the global automotive forecasting firm, said today that it expects vehicle sales in Europe to fall for the third consecutive year in 2010, as governments in the West pull away the scrappage schemes that propped up demand in 2009.

CSM is forecasting that 2010 sales in Europe will fall 7.9 percent to 16.7 million units. That follows declines of 13.4 percent in 2009 and 5.1 percent in 2008, when total European sales were 21.0 million units.

"The overall sales decline would have been much worse if not for government-backed scrappage programs, which gave many volume manufacturers breathing room in the second half of the year," said CSM's Walt Madeira, manager, European vehicle forecasts. "In countries that didn't offer any sort of government-backed aid, new vehicle demand went into freefall, with sales declines ranging from 20 percent to 70 percent."

Western Europe

CSM forecasts a 2010 sales decline of 10.6 percent in Western Europe, which reflects the fact that many consumers pulled ahead their purchases in 2009 in order to take advantage of government incentive programs.

In the region, vehicle sales had been declining for six consecutive quarters up until the third quarter of 2009, when demand rose 3.8 percent. The next quarter saw a significant 17.5 percent year-over-year increase as many governments announced that the financial incentives tied to vehicle scrappage would be severely reduced or discontinued altogether.

"When you consider that demand levels were down by approximately 13 percent in the first half of the year, the performance in the second half was remarkable," said Madeira. "This positive consumer response provided some breathing room for volume manufacturers across the industry."

Eastern Europe

In Eastern Europe, which endured a punishing sales decline of 42.4 percent in 2009, sales will rebound slightly in 2010, CSM forecasts.

A slight increase of 4.6 percent in Eastern Europe to 3.4 million units will be far below the record levels of the recent years, and it will be insufficient to brighten the cloudy settings for Western Europe.

"Recent rising star markets such as Russia and Ukraine have been devastated by the global economic downturn," adds Madeira. "It will take a four- to five-year period for most Eastern European markets to recover and show their true potential once again. In 2010, carmakers will concentrate on defending market share in domestic and traditional high-volume markets rather than spreading resources for capturing market share in Eastern Europe."

    
    European Sales Outlook

                                        2008         2009         2010
    Light Vehicle Sales (millions)
    Western Europe                      15.3         14.9         13.3
    Eastern Europe                       5.6          3.2          3.4
    Europe                              21.0         18.1         16.7
    
    YOY Percent Change
    Western Europe                     - 8.7%       - 2.8%      - 10.6%
    Eastern Europe                     + 6.3%      - 42.4%         4.6%
    Europe                              -5.1%       -13.4%       - 7.9%

Production Will Be More Resilient

In terms of vehicle production, CSM said many manufacturers will be forced to rebalance their production as the pullback in government incentives puts the brakes on consumer demand.

"Overall, vehicle production will prove more resilient than demand," said Mark Fulthorpe, director, European vehicle forecasts. "Automakers sharply cut their production in late 2008 and 2009 at the same time scrappage programs in Germany, France and other countries were successfully driving sales. It's time for many manufacturers to rebuild inventory, but caution is the watchword since consumers are still feeling the impact of recession, and we are reverting to more natural demand levels."

CSM estimates that production levels in 2009 were 16.3 million units, down 20.3 percent compared with 2008. The outlook for 2010 is expected to see output levels constrained to 16.2 million units, a further 0.9 percent decline.

Compact and small cars, especially those brands and nameplates that saw their performance inflated by incentives in 2009 such as Ford, Fiat and Volkswagen, will face a tougher challenge.

"The weak sales and production environment will exacerbate the industry's long-standing overcapacity issue," said Fulthorpe. "Even though the restructuring of GM's European operations is ongoing, companies such as Fiat, Renault and PSA will be under pressure to balance manufacturing abroad with jobs preservation at home."

Production of larger, more export-oriented offerings should fare better than small and compact cars.

"We look for an improvement in European fleet activity, plus a stronger recovery in international markets for the German premium marques, but it will be tempered by the Euro-to-U.S.-dollar exchange rates," Fulthorpe said. "New products like the BMW 5 Series, a full E-Class lineup from Mercedes-Benz and new niche vehicles from Audi will need to be attractive to discerning customers both within Europe and around the world."

About CSM Worldwide

CSM Worldwide provides trusted automotive market forecasting services and strategic advisory solutions to the world's top automotive manufacturers, suppliers and financial organizations. CSM Worldwide covers the global automotive environment from Detroit, Grand Rapids, Sao Paulo, London, Paris, Frankfurt, New Delhi, Bangkok, Shanghai, Seoul and Tokyo.

Mark Fulthorpe, markfulthorpe@csmauto.com or Walt Madeira, waltmadeira@csmauto.com, +44-1932-349-661, both for CSM Worldwide