European and Indian auto industry projections point to car sales decline: SIAM and ACEA

The global auto industry isn’t set to work wonders in regards to sales growth given the current economic situation. Only recently, Society of Indian Automobile Manufacturers (SIAM) reported that January 2011 sales for the Indian auto market were lower than projected and at the going rate, Q1 of 2012 will not project a sales growth graph.

This week, Moody’s Investors Service went on to lower the 2012 European car market forecast. The projected figures now stand at YOY sales decline of 6.2% in comparison to a past report predicted a flat market.

Falk Frey, Moody’s Senior Vice President’s report says, “Our 2012 base-case scenario anticipates a 6% decline in European light-vehicle production volumes and a 6% decline in unit sales volumes.” “There is significant downside risk that the macroeconomic situation in the region will worsen.”

He elaborated that further weakening of the European economy would pave the way for squeezed profits, and pricing pressure. A number of car manufacturers that rely on vehicle sales in Europe were faced with difficulties when trying to remain profitable in 2011.
As per a report this week, European automobile manufacturers’ association (ACEA) new car registrations January 2012 declined 6.6% in Europe. Numbers are hurting because of lower car sales in major car markets in Europe.

The situation in Europe has been grim these past few years with demand for new cars being reduced. In the face of such trends, the European auto industry deals with over capacity at around 20%. However Europe has so far been able to bypass large-scale cutbacks despite an industry downturn in 2008 and 2009, attributed in part by political resistance. European countries resorted to scrapping incentive schemes that prompted car owners to trade in old gas guzzlers. The move works towards luring buyers back to dealerships to buy new cars.

Falk Frey went on to say, “We do not believe European governments would be able to offer the same level of support to troubled auto makers as they did in 2008/09 if there is a recession in the near term” “Also, demand growth has actually declined in western Europe since the 2008/09 downturn, but technical production capacity has increased as Asian manufacturers have entered the market.”