October 3, 2012
The year 2012 is likely to constitute a turn-around for the European automotive market: producers will have to confront a 7 percent fall in sales. This decline is a continuation of the gentle downward trend that has started in 2009. Aggravated by the economic crisis that has gripped Europe, it is likely to become a structural phenomenon.
European car makers can no longer expect selling some 15 million cars in the domestic market as they have done during the boom years 2001-09. They should be more than happy to sell 12 million and brace for even worse scenarios with sales falling to 10 million or below.
Indeed, Europe’s streets are crammed with vehicles; parking space is getting rare and expensive, finally forcing citizens to switch to public transport, especially in very big cities where car traveling speed is slowing down, compared to subways and trams. The car is losing its superiority: it no longer guarantees unrestricted freedom of mobility and ceases to be a “status symbol”.
Manufacturers will try to cope with the situation with three main strategies:
- make up for the stagnation/decline of domestic sales by export and outsourcing strategies;
- cut costs by closing the least productive plants;
- focus on luxury brands or energy-efficiency.
The European automotive industry will hardly overcome the decline of sales without another round of concentration/mergers and lay-offs. The sooner it wakes up to the long-term structural challenge the smoother the necessary adjustments will be.
Higher fuel efficiency should be a key component of any strategy. The next generation of vehicles should target at a consumption of less than four liter/100 km: In an era of rising fuel prices low fuel consumption will increasingly determine the competitiveness.
Diesel and hybrid technologies, combined with weight reductions still offer unexploited potential for lower consumption.
There is no urgency to promote electric cars by government premiums, whatever the pressure from the industry. It is irrelevant if by 2020 the German car industry will produce 1 million electric cars or only 600 000. As long as electricity does not come from wind or solar generation, which will not be the case by 2020, electric cars do not offer any environmental advantages.
The European car industry is, of course, of pivotal importance as an employer and source of technological innovation. But that cannot justify efforts to prevent it from shrinking or protecting it against intensive international competition. Like any other industry it has to constantly reinvent itself.
The EU and member state governments should actively assist this permanent adjustment process.
Eberhard Rhein, Brussels