Analysts at LMC Automotive have told just-auto that the European auto industry is heading for a sharp downturn in 2012 stemming from the region’s ongoing economic crisis. However, they also say that the downturn will be much less severe than that of late 2008 and early 2009 because there is less of a surplus stock problem this time round.
LMC Automotive analyst Arthur Maher believes that the economic crisis in Europe will inevitably lead to lower car sales across the region next year. “The eurozone continues to struggle to manage the sovereign debt crisis,” he points out. “And governments are also moving pretty aggressively to tighten fiscal balances and for a number of EU states that could prove to be a vicious circle. It’s a low growth economic environment and against that background we forecast that West European car sales will fall back by 5% in 2012.”
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With the market down next year, Maher says there will be an accompanying adjustment for the region’s vehicle manufacturing sector with a drop to Europe’s light vehicle production total of 6.5% forecast (to 19.1m units in 2012). Within that total, higher demand in Eastern Europe supports output there to produce a small gain (0.6% to 6.5m units) while Western Europe’s production is forecast to fall by 9.7% to 12.6m units.
“That is serious, of course,” Maher acknowledges. “But it’s less severe than what we saw in the last big downturn of late 2008 and 2009 when the industry was burdened with around 2m units of excess stock and we saw output contract by 20%. Without that stock problem, output then would have fallen by more like 10% – half of the collapse to production that occurred was therefore down to destocking.
“Currently, industry stockholdings are fairly well managed and, depending on the severity of the downturn to demand predicted for 2012, the industry is not starting with a major stock overhang.”
Maher notes that Ford, PSA, Renault, Toyota and Opel have all announced plans to trim production and that some new model programmes are also slipping. And some premium OEMs are still working hard to meet strong orders from Asia, he says. “From an industry point of view, it’s a very different situation from that which we were faced with in late 2008,” he says. “We believe that the industry will continue to work hard to avoid a repeat of the 2009 stock crisis. In general, we expect OEMs to remove individual lines and thus capacity as and when new models are introduced – politically this is much more achievable in Europe.”
Light vehicle exports out of Europe are forecast by LMC to have risen by over 400,000 units in 2011 to exceed 3m units, with North America and Asia accounting for much of the growth. Overall vehicle export flows from the region are expected to stay at around that level in 2012, highlighting that next year’s volume drop is being caused by the impact of economic difficulties in Europe.
Nevertheless, pan-European light vehicle production of 19.1m units in 2012 would still be significantly above the 2009 nadir of 16.7m units after the strong bounce-back since then (helped by European scrappage incentives in 2010 as well as the steady export boom to North America and Asia). However, LMC Automotive doesn’t see the total getting back to 2007’s pre-crisis 22m unit level until 2014.
