The short-term outlook for car production in Europe is being depressed by still-weak demand in western Europe and some stock overhang from 2003, according to forecasts presented by JD Power-LMC analysts at a conference in London on Thursday.

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Western Europe car sales are forecast to reach 14.5 million units in 2004, a gain of just 1.4% over 2003 (when sales fell by almost 2%). The forecaster maintained that consumer spending will remain depressed in the key German market and that the German car market will be flat in 2004. That’s in spite of the impact of important new models like the Volkswagen Golf and Opel Astra.


JD Power-LMC also forecast that 2004 growth will be negligible or flat in France, Italy and the UK, although Spain is a bright spot with car sales forecast to expand by 5.4% to 1.5 million units. The forecaster also said that the Spanish car market holds good long-term demand potential as car ownership catches up with the higher levels seen in northern Europe.


JD Power-LMC also said that in 2005 the western Europe car market is forecast to grow by 3% to 15 million units driven by recovering demand in Germany (+8.4%) and France (+7.3%).


JD Power-LMC analyst Arthur Maher said that the weak short-term outlook for car demand in western Europe combined with a stock overhang from 2003 of around 170,000 units, means that total car production in Europe will grow by just 200,000 units in 2004.

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He also pointed out that Europe is seeing a regional shift in production from west to east. Western Europe car production is forecast to decline by about 100,000 units in 2004 but car production in central and eastern Europe is forecast to expand by approximately 300,000 units over the previous year. Maher added that key models driving production growth in central and eastern Europe in 2004 included the Toyota Corolla Verso in Turkey (counted for statistical purposes as in eastern Europe, although the plant is actually in Asia) and the Fiat Panda which is made in Poland. JD Power-LMC forecast that the eastern share of European car build will rise by 7% by 2009.


However, the western Europe market recovery forecast for 2005 is expected to flow into increased production in western Europe.


JD Power-LMC analyst Pete Kelley had earlier pointed out that car manufacturers in Europe responded to sharply falling demand in early 2003 by choosing to introduce pricing incentives to support volumes and avoid layoffs or plant idlings. That strategy helped to avert a large fall in sales, he said.