European Car Industry Worries About 2015

The ACEA (European Automobile Manufacturers Association) leadership commented:

Last year, new passenger car registrations were up 5.7% on the previous year, reaching 12.6 million units. “This is significant because it was the EU’s first positive annual result since the financial crisis began in 2007, with December marking the 16th consecutive month of growth,” said ACEA President, Carlos Ghosn. “However, our optimism about this early sign of recovery must be tempered with caution, given the economic uncertainties still facing many countries.”

ACEA expects growth to continue in 2015, but at a considerably slower pace, with a year-on-year forecast in the region of 2%. In terms of units, this would mean edging closer to the 13 million units mark.

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Ghosn has skin in the game. He is the chief of both Renault and Nissan. Renault is among the largest car manufacturers in Europe, and Nissan has a modest presence in the market.

Putting the forecast in context, the U.S. market is expected to produce 16.5 million car and light truck sales in 2015. If January sales numbers are an indication, in some months sales growth in the country will reach over 10%. The United States has been the bright spot for car companies over the past two years. As the second largest market, it trails only China, where uncertainty about government incentives for car purchases and the problem of air pollution loom.

The challenge of Europe includes, particularly, Volkswagen, which holds market share of nearly 25% in the region. U.S. manufacturers have reason to worry as well. Europe has become an important market for Ford Motor Co. (NYSE: F). General Motors Co. (NYSE: GM) also has a large presence there, although its trouble with market share continues year after year. A slowdown in Europe would make a GM turnaround there close to impossible.

As Europe’s economy moves back into a danger zone, based to some extent on deflation and national debt levels that are still too high, the ACEA forecast may be too high as well.

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