Arab Today, arab today slump in european car sales leaves automakers struggling
Last Updated : GMT 04:09:50
Arab Today, arab today
Arab Today, arab today

Slump in European car sales leaves automakers struggling

Arab Today, arab today

Arab Today, arab today Slump in European car sales leaves automakers struggling

Stockholm - Arabstoday

A handful of people have shaken off the wet snow and entered the Bilia car dealership in Stockholm. They\'re far outnumbered by the gleaming Volvos, Fords and Renaults. They\'re not eager to strike a deal. \"The customers are hesitating more and the sales process takes a longer time,\" said Arne Ericsson, deputy regional chief at Bilia Personbilar AB, the Nordic region\'s largest dealership chain, adding that orders started slipping in mid-November. Much of the region\'s auto market is faring even worse than in relatively healthy Sweden. European car sales will fall about four per cent to approximately 13 million vehicles in 2012 from last year\'s estimated 13.5 million, PricewaterhouseCoopers forecasts. It would be the fifth consecutive decline from the 2007 peak of about 16 million cars. PSA Peugeot Citroen, Renault SA and Fiat SpA will suffer most because of their high reliance on Eur-opean sales, said Arndt Ellinghorst, a London-based analyst with Credit Suisse. Article continues below Peugeot generated 73 per cent of revenue in Western Europe last year, while Renault and Fiat earned 70 per cent and 54 per cent of their sales on the continent, respectively, according to data compiled by Bloomberg. Most at risk \"Peugeot and Fiat are probably most at risk\" in 2012, Ellinghorst said. \"They\'re just too exposed to European markets, they don\'t have the strongest product momentum, and their balance sheets are already stretched.\" American and Asian carmakers are also taking a hit in the region. General Motors Co. lost money in Europe last year, the company said in November after assurances earlier in the year that it would break even. Ford Motor Co. reported a $306 million (Dh1.12 billion) operating loss in the third quarter in the region, even as it increased market share. Toyota Motor Corp.\'s European deliveries through November were down eight per cent to 505,688 vehicles. European sales at Peugeot, Europe\'s second-biggest carmaker after Volkswagen AG, fell 13 per cent in November. The company\'s automotive division lost more in the second half than what it earned in the first, when it posted an operating profit of €405 million (Dh1.9 billion), CEO Philippe Varin said on December 14. Job cuts The Paris-based company could cut as many as 6,800 jobs, including temporary workers and staff working for contractors. Renault, France\'s second-biggest carmaker, could delay investment projects and is reducing inventories to conserve cash. \"These last weeks, we are back to a trend which is very, very similar to the one we had in 2008,\" chief operating officer Carlos Tavares said in an interview on December 16. \"It\'s a serious, serious situation.\" Renault is \"much better\" prepared for the slowdown than it was three years ago because of lower debt and fewer vehicles in stock, Tavares said. The company, which is 15 per cent owned by the French government, will avoid firing employees, he said. Car sales in France will suffer as banks tighten lending, said Francisco Carvalho, a London-based analyst at IHS Automotive. \"French banks may be hit hard from the euro crisis, as they have a lot of exposure to southern European debt,\" Carvalho said. \"Consequently, credit availability for the car market will go down in France.\" Fiat is working to stem an increase in debt as the Italian car market approaches a 30-year low in sales. The company could revise its operating profit targets for 2012 because of falling demand, CEO Sergio Marchionne said on December 14, adding that the US and South America will help \"absorb a slowdown of European markets\". Control of Chrysler Fiat increased its stake in Chrysler Group, the third-largest US automaker, to 53.5 per cent in July, helping reduce the Turin, Italy-based company\'s dependence on Europe. US sales at Chrysler, which also makes Dodge and Jeep brand vehicles, were up 25 per cent through November. Fiat is Brazil\'s biggest carmaker. Consumer confidence in Europe dropped last month to its lowest level in more than two years, and manufacturing and services output contracted for a fourth month. In Germany, Europe\'s largest economy, incentives to encourage car purchases have risen lately. The average dealer\'s incentive among the major brands rose to 11.1 per cent in November from 10.5 per cent in June, led by Peugeot, Renault and Fiat, according to trade publication Autohaus PulsSchlag. When all incentives in Germany are counted, such as rebates offered by internet dealers, the average approaches 18 per cent, the highest level in five years and up from 15 per cent a year ago, said Ferdinand Dudenhoeffer, director of the Centre for Automotive Research at the University of Duisburg-Essen. \"Carmakers need a lot of incentives to convince customers at the moment, and that will not improve in the first half of [2012],\" Dudenhoeffer said. VW has managed to buck the downward trend in the overall European market on the strength of new models. Europe\'s largest carmaker has increased 11-month sales in the region 7.7 per cent. Wolfsburg, Germany-based VW, which also owns the Audi, Skoda and Seat brands, introduced a new version of the Passat mid-sized car and a revamped Audi A6 sedan this year. The volume brands will continue to underperform premium makers Bayerische Motoren Werke AG, Audi and Daimler AG\'s Mercedes-Benz in 2012, said Richard Hanna, head of PricewaterhouseCoopers\' automotive team. While the luxury-car manufacturers will be buoyed by corporate car spending, the mass makers will suffer after governments in 2010 ended subsidies encouraging purchases of more fuel-efficient cars put in place to help the auto industry during the 2009 recession, Hanna said. In the UK, Google searches for buying new cars dropped by half in the fourth quarter from the same period last year, said Simon Empson, managing director of Broadspeed.com, which connects customers with dealers. The level of online searches is \"a strong indicator\" of sales, he said. \"At the moment there\'s absolutely no good news out there,\" Empson said. \"People are either scared of losing their job or about the level of their income.\" Arne Ericsson, the dealer executive in Stockholm, said his company found a sales opportunity in last week\'s bankruptcy declaration by Saab Automobile, which may force it out of business. The dealer plans to mail Saab owners in Sweden offers that include paying them higher-than-normal amounts for the Saabs they trade in when they buy a new vehicle. \"Times are getting tougher, and this is a chance for some extra business,\" Ericsson said.  

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