LONDON - Forecasters have raised their expectations for European car sales in 1997, mainly because Italian scrapping incentives are successful.
The new incentives will have a bigger effect than similar subsidies in France because entry-level small cars are more important in Italy, said GM Europe economist Paul Holtgreive.
'It's like a 20 percent price cut on 80 percent of the market,' said Holtgreive, speaking at a conference in London, organized by consultant J.D. Power-LMC.
He predicted that the Italian market will grow by at least 18 percent this year.
Holtgreive also said that the end of the scheme on 30 September is unlikely to be followed by an immediate collapse in sales. This is because the incentives apply to cars ordered as well as those paid for. To qualify for a rebate under France's juppette scheme, dealers had to be paid in full.
The weakness of the French market in the first four months of 1997 was expected by most of the industry, said Holtgreive.
Scrapping incentives boost sales, but are 'probably more trouble than they are worth,' he said. The French juppette 'accelerated the elimination of the domestic price premium and institutionalized incentives.'
Holtgreive predicted that car prices in northern Europe will continue to decline. A reduction of around 5 percent is possible over the next few years, he said.
Arthur Maher, head of European forecasting at LMC, said the strength of the Italian market means that Fiat will have a 'banner year' in 1997.
LMC expects car production in Europe to fall behind European sales by 200,000 in 1997. Carmakers will lose share in their home markets and also lose 30,000 exports to South America, according to LMC.
Carmakers will also reduce their stocks. The number of new model launches will not match 1996 or 1998.
'The European carmakers are sending out mixed signals,' said David Leggett, forecast director at consultancy CSM Corp. 'But several manufacturers, notably PSA and Renault, are in trouble in the face of cutthroat competition and a rebounding Asian market share,' he said.
Asian carmakers increased their Europe market share to 12 percent in the first quarter of 1997.
In its latest forecast, the Economist Intelligence Unit predicts that sales of Japanese cars in western Europe will be one third higher in 2000 than in 1995. The EIU expects Japanese makers to target France, Italy, Portugal and Spain when import quotas expire in 1999.
The EIU expects production by Japanese makers in western Europe to grow from 759,600 units in 1996 to 1.1 million units by 2001.
German forecaster Marketing Systems expects Ford and GM Europe to have a tough year. Both companies are suffering from aging core models, particularly the Opel Astra and Ford Escort, said Marketing Systems analyst Thomas Mawick.
Both Ford and Opel have been discounting heavily but are under pressure from better-equipped Golf models from Volkswagen.
Marketing Systems expects GM Europe's output - including Saab - to rise by only 0.8 percent this year. Ford's production across Europe - including Jaguar and the Fiesta-based Mazda 121 - is expected to fall by 2.9 percent.
Ford's Ka has been successful but there has been a lot of cannibalization of Fiesta sales, said Mawick. 'Sales of the Fiesta and Ka are not much more than they were for the Fiesta alone,' he said.