Market decline 'uneven' across Europe
The latest report from AlixPartners reveals that the decline in vehicle sales is not evenly distributed across Europe, but has distinct focal points.
Belgium, Italy and France have experienced double-digit declines in sales and the outlook remains negative. In the UK, Germany and Spain, by contrast, declines have been relatively moderate (between 0.8 per cent and 2.4 per cent), while the markets in Russia and Poland have grown slightly.
The European automotive industry is severely in need of consolidation, says AlixPartners. In North America, the crisis of 2008/2009 led to "a healthy streamlining" of the automotive industry – by contrast, only three car factories have been closed in Western Europe since 2007, while eight Eastern European plants were opened during the same period.
Said Stefano Aversa, Co-President of AlixPartners and head of the firm’s EMEA operations: “With some markets like Italy trending at a 20-year low, European passenger car sales are expected to decline seven per cent this year. Market recovery in 2013 will be difficult under these conditions and we therefore expect a further cooling of demand in Western Europe.”
Car production consolidation needed
As a result, 40 per cent of European plants are operating under their financial breakeven points – equal to a capacity utilisation of around 75-80 per cent.
Plants with the lowest capacity utilisation are primarily found in France, Italy and Spain, but also in growing markets such as Russia and Trkey. Companies with the best performance are premium manufacturers and new, low-cost entrants, including those from Korea.
The effect of over capacity leads to heavy discounting and the decrease in demand particularly affects volume manufacturers, whose markets are threatened from both above and below. The ‘value brands’ (Dacia, Hyundai, Lada, Kia etc) are attacking from below with aggressive cost-performance promises, while premium brands such as Audi, BMW and Mercedes are increasingly positioning new models in market segments traditionally occupied by the volume manufacturers
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