European Vehicle Production Outlook ‘Very Good Indeed’

The Society of Motor Manufacturers and Traders anticipates a rise in vehicle production volumes this year, the start of a recovery that will accelerate over the next two years. “Looking at the production picture in Europe at the moment, we think the recovery is actually beginning now and despite the threat of the financial crisis hitting Europe we think there is a good chance that 2010 will be much better than had been hitherto thought,” stated Ian Henry, director of AutoAnalysis and author of the May 2010 SMMT report on production outlook. “We actually now think that in 2010 the volumes will actually be up over 2009 and we think there’ll be a further recovery in 2011. But the real climb back will come from 2012, once the financial crisis has completely been erased and a range of new models come on-stream.”

According to the ‘European Car and LCV Production Outlook Report’, commissioned by the SMMT, the recovery in production volumes has been underpinned by better than expected performances from several vehicle manufacturers and specific models. It is expected that European volumes in 2010 will reach 17.2 million units compared to 16.1 million in 2009.  By 2014, production volumes are expected to grow to reach 20.4 million, a return to the levels achieved in 2007. In the UK, production is anticipated to grow from 1.1 million units in 2009 to just under 1.6 million in 2014; an increase of more than 46 per cent, yet still down on 2007 levels.

“Although vehicle production volumes across Europe fell by more than 2.8 million units in 2009, there is increasing confidence regarding 2010 and beyond, thanks to the acceleration of new model programmes and the strong performance by many vehicle manufacturers over the first quarter of 2010,” commented SMMT chief executive Paul Everitt. 

These ‘green shoots’ of recovery are expected to occur despite a number of recent issues. “The economic and financial recovery has been at some risk in recent times due to the major concerns regarding the Greek debt situation and worries about the other PIGS’ economies,” Henry commented. “And in the UK we’ve also got some uncertainty following the recent election, there is a fear of a double-dip recession here. However, over the last couple of days the EU finance ministers, the ECB and the IMP appear to have stabilised the situation with a new, and rather expensive, financial package.

“We also have to bear in mind of course that the scrappage schemes that boosted production and sales last year have come to an end, and we know from Bank of England data that they had boosted registrations last year quite significantly,” the SMMT analyst continued. “There’s also the serious issue of overcapacity in the European production arena. There’s structural overcapacity of as much as nine million units a year and we have the problem that vehicle manufacturers have been historically reluctant to close car plants; they appear to be preferring to cut shifts and slow down line speeds.”

Although the SMMT remains concerned about the overcapacity issue and the indecision on the part of vehicle manufacturers regarding the closure of several plants, the general consensus is that growth will occur. “Overall we have a more positive outlook for production in Europe,” stated Henry in his concluding comments during an SMMT analyst briefing. “We assume there will be no double-dip recession, we’re much more optimistic than previously, and assuming the Greek debt crisis does not spread and the UK political situation is resolved quickly we believe the outlook for 2010 is very good indeed.”