Blog: We're not out of it yet
Dave Leggett | 10 August 2009
There have been several strands of relatively good news lately. There's more pain to come in this industry, but it does at least look like we've hit a kind of stabilisation phase with some signs of recovery ahead. That's true for both the wider world economy (although rising unemployment in the US and Europe will temper the good news for some months yet) and the autos sector.
One thing that is of course notable is the positive impact that government actions are having on automotive markets across the world.
In China and India (and especially China), government packages have been very successful in lifting car demand in recent months.
In Europe, Germany has led the way with a scrappage incentive which, combined with manufacturer discounts, has lifted its car market by around a quarter this year. And now the US vehicle market is seeing some stimulus from 'cash for clunkers'.
The inherent difficulty with such special measures is the adverse market impact when they are removed. If you encourage a consumer to purchase a car now, to take advantage of a temporary scheme that makes the car cheaper, it may well be a sale that is brought forward from a future time period.
Next year could be very tough when schemes expire. And even if they are extended, we're into diminishing effectiveness.
As Carlos Ghosn has said, it could be a very tough 2010 in Europe. JD Power has warned that a negative German market correction from this year's expected near 4m unit market (a ten year high) could send 2010's German car market as low as 2.6m units.
The hope has to be that underlying economic performance is gaining momentum by then and helping to pick up the slack when such government support wanes.
We're not out of it yet.
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