Surviving the Recession: Europe’s Automobile Industry

Fri, 23 Jul 2010

by Brian Mitchell

Over the last few years, governments made efforts across Europe to increase the number of car sales and new passenger car registrations. Part of the catalyst for this push have been environmental concerns, prompting incentives to be introduced to trade in older, less fuel-efficient, less environmentally-friendly cars, for more modern, economically and environmentally smart cars.

However, figures released last week by the ACEA (European Automobile Manufacturers’ Association), relating to the registrations of new cars in the EU (without Cyprus and Malta for whom the relevant data was unavailable), show that car sales in June 2010 were down 6.9% on June 2009’s figures, with 1,341,092 sales registered compared to 1,440,475 for the same month last year. This figure of 6.9% is of course an EU-wide average and a deeper look into the statistics reveal a wide disparity in sales decreases (and increases) from country to country. Germany witnessed a drop above the European average at 32.3%, while other main European markets such as Italy and France suffered drops of 19.1% and 1.3% respectively. The biggest decrease (40.6%) over the period occurred in Slovakia. Conversely, countries which recorded an increase in registrations over the period included the UK (10.8%), and Spain (25.6%), while the biggest increase occurred in Ireland (75.8%).

Ultimately, the 6.9% drop in car registrations represents a slow-down in the decrease in new registrations as 2008 had seen new car sales plummet by 7.8%, the worst drop since 1993. In a period of continued economic uncertainty, a key factor in limiting damage to car sales in Europe has been the introduction of fleet renewal programmes by individual EU countries, including market incentives and car scrapping schemes. Since the end of 2008, fourteen EU states have implemented such schemes. The advantages to the industry brought about by these schemes have ensured it can better withstand the economic downturn. Countries that implemented renewal schemes have generally fared better than those that did not.

For example, over 2009 as a whole, passenger car registrations increased by 23.2% in Germany, 10.7% in France and 8.8% in Austria. In addition, fleet renewal schemes produce many spin-off advantages. For example, when car sales increase then so do tax revenue, consumer confidence and vehicle production. This in turn means, as more than 80% of cars sold in the EU are produced in the EU, that employment is maintained in the automotive industries.

One of the key benefits of the renewal schemes concerns the environment because the schemes target older cars which have been on the road for 9 or 10 years. In replacing these cars, CO2 emissions and noise levels are reduced and these older cars are scrapped. The implementation and gradual phasing out of these schemes across Europe has meant that, while passenger car sales are still decreasing, the industry is better insulated against the economic downturn. To prove this, over the period January to June 2010, EU registrations have increased by 0.2% in comparison to last year’s figures.