Analysts at JD Power Automotive Forecasting say that after a year that has seen unprecedented destocking by manufacturers, the outlook for European light vehicle production is forecast to turn positive in spite of an expected downturn to the market in 2010.
Analyst Arthur Maher told just-auto that the production cycle has now turned full circle and that car production levels in Europe are now close to being realigned with market conditions.
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Moreover, Maher maintains that the exceptional adjustment that idled car plants for months after the economic and financial crisis deepened late in 2008 won’t be repeated.
“The point is this: there was a need for massive destocking at the end of 2008 and in the early part of this year, with around 2m cars of excess stock needing to be removed. That’s been worked through now and even though the market is turning down in Europe, the industry will not have to suffer a repeat of the massive downtime which aggressively took hold last December.”
JD Power forecasts that European light vehicle build will grow by 3% in 2010 to around 17m units, which compares with a decline of 21% this year (build in 2007, the last peak, was 22m units).
However, the overall volume uptick will not be big enough to remove a large overhang of overcapacity in Europe, which JD Power calculates at 7m units.
Maher estimates that overall capacity utilisation in Europe is currently running at around 60% with some ‘major plants’ only running at 20% utilisation.
“This serious overcapacity situation is not going to show any significant improvement in the foreseeable future and therefore any improvement to market demand will be insufficient to remove the problem – it is something that the OEMs cannot ignore for long.”
Dave Leggett
