Central Europe Promises Better Times

A number of manufacturers, including Ford, Opel and Renault are quoted as seeing high potential future growth in the central and eastern European (CEE) countries. With reports of the 2011 decline now reversing or at least flattening out. Whilst this may be a glimmer of hope for the beleaguered European auto industry it is worth remembering that the total combined first half year sales of passenger cars for the EU10 (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) is just shy of 400,000 according to the ACEA, which is only 1.05% up on 2011.

Moreover this combined total represents less than 6% of the total EU27 car sales and it is still less than the decimated fifth largest car market of Spain on its own. However you look at it total new car sales across Europe are down which means the number of left hand drive vehicles in the used car parc of 1-5 year old vehicles are on target to be almost 10% lower than back in 2007. This is one of the reasons why we are not seeing the sort of collapse of used vehicle values in the same way we are seeing for new vehicle sales in some markets. But the heavy discounting on new sales is a problem for younger used vehicles, see later article on heavy discounting.


French want South Korean Imports under EU Surveillance

Barely a year into the free trade agreement (FTA) between the EU and South Korea and the beleaguered French manufacturers have requested prior surveillance. Under the FTA if producers in certain industries are hit by a strong surge in imports the EU can invoke a safeguard clause to re-impose duties. However the French are clutching at straws, taking Hyundai as the example 70% of their cars registered in Europe this year were from European plants with less than 12% coming from Korea according to their spokesman, Andreas Brozat. Fiat CEO, Sergio Marchionne also recently tried to attack the rise of the South Koreans in Europe but they are clearly here to stay. The automotive landscape over the next 5-10 years is going to be survival of the fittest and that means sorting out the problems some European manufacturers have internally rather than just trying to blame others.


Heavy Discounting across Europe Continues

Recently we have seen stories of very heavy discounting with VW being described by Fiat CEO, Sergio Marchionne, as a “bloodbath of pricing and .. a bloodbath on margins” and now we have Opel advertising huge discounts across much of their model range. IN both newspaper and magazine articles and on their own website in Germany they are offering such deals as Corsa at €9,990 and €2,800 of options, Astra at €13,990 and €3,510 of additional options.

This level of discounting has historically been the reserve of daily rental companies and not normally so blatantly publicised, due to the very negative impact it has on used values. As I mentioned the reduced 1-5 year old car parc is helping RVs remain generally buoyant but if this trend of very high and very public discounting continues for much longer it is going to be bad news for used car traders who may see the value of their stock fall almost as sharply as during the darkest hours of the credit crisis in 2008-09.

Fiat to meet Italian Government over Investment Plans

Talking of Fiat and Sergio Marchionne and the Italian Labour minister Elsa Fornero are planning to meet to discuss Fiat maintaining its investment plans. Fiat have recently been very public about blaming the five year slump in the European car market for not announcing new investment, however with other manufacturers pushing ahead with new products this will only serve to widen the gap between Fiat’s ageing model line-up and this will do nothing to help them with struggling sales. As mentioned above, the South Korean manufacturers have proved that investment in appealing new products can fight against depressed market trends thus supporting the old adage about spending yourself out of recession, however the Fiat plan looks set to end in one only one course and that is further job cuts and plant closures.


GM Hit with a $3bn Claim

Bloomberg have reported that Spyker is suing General Motors for $3 billion for the bankruptcy of its subsidiary Saab. Spyker is claiming that GM’s blocking tactics with potential Chinese buyers of the Swedish brand caused its collapse not even two years after Spyker acquired Saab from GM. GM have responded by describing the lawsuit as “…completely without merit”.


Mitsubishi halts EV production of PSA versions

If any other model, excluding niche models, sold in such few numbers they would be consigned to the automotive history books, but the level of financial commitment and the amount of Government pressure on OEMs, has until now meant that every week there is news of a new model, or price changes or almost anything to keep the Electric Vehicle in the news.

However this week it would seem that PSA and Mitsubishi have admitted building EVs when there is little demand is not good business sense and they have therefore announced that they are suspending production of the PSA badged C-Zero and iOn with no date announced for when production might restart. During the course of this year we have seen price reductions of over 16% by PSA in an attempt to increase its appeal, but the truth seems to be that buyers are just not willing to risk their hard earned cash on such new technology in such times of economic uncertainty.


Not All is Doom and Gloom

In trying to find a cheerful note to end on Reuters have reported that whilst manufacturers face government probes into attempts to cut back jobs the parts supplier market has been able to do those cuts in relative peace and are now seeing the benefits to their bottom line.