THE WEST EUROPEAN car market will grow 1.1 percent next year, according to a consensus of forecasts.
Last year, the forecasters predicted a 1.2 percent rise for 1997. The market actually rose 4.1 percent, thanks to unexpected scrapping incentives in Italy. Without Italy, Europe was flat in 1997.
'It's only late in the year (1997) that the European market has shown growth,' said Arthur Maher, head of European forecasting at JD Power-LMC.
FRANCE: Forecasters expect the French market to recover to more normal levels in 1998. French sales fell more than 20 percent in 1997, cycling against a year of government incentives.
ITALY: The Italian market is expected to drop 14 percent, if incentives run out in July as planned.
UK: Sales have been strong since August, and the strength will continue into this summer, says Maher. CSM Europe and the EIU disagree.
'The UK is losing momentum,' says David Leggett, director of forecasting at CSM Europe. Leggett is forecasting a 5.1 percent fall in the UK market in 1998. 'The replacement cycle is past its peak.'
GERMANY: Sales will rise as a result of new models like the Volkswagen Golf, Mercedes-Benz A-class and Opel Astra. Production of neither the Golf nor the A-class reached full capacity in 1997 due to quality concerns.
Marketing System's Ulrich Winzen forecasts 8.5 percent growth for Germany. 'Unemployment will still be very high but will not rise much further,' he says.
The rise in VAT from April from 15 to 16 percent will cut about 12,000 units off the market, but Winzen sees a strong positive effect from long-term replacement cycles in the German car fleet.
SPAIN: Philippe Houchois, who follows the Spanish market for DRI, forecasts a market of 1,050,000 cars, a little up from this year's expected 1,016,000 units.
Houchois says the market would be strong even without Spain's semi-permanent incentive scheme. He says, 'Consumption is picking up nicely.'
The peak or not?
Forecasters are evenly split on whether 1998 will be the peak of the current cycle.
Two of the forecasting groups expect a sharp decline in the European market in 1999, and one expects a flat market.
Ian Robertson at the EIU says that car sales will be affected 'by environmentally inspired heavier taxation' and an economic slowdown due to countries trying to meet monetary union convergence criteria.
Jean-Michel Prillieux, head of statistics and forecasting at Mavel, also sees the car market declining in 1999 due to economic tightening associated with the introduction of the single European currency. However he says that in 2000 the market will rise to 13.6 million units again.
Arthur Maher at JD Power-LMC says that the Korean and Japanese share is likely to grow in 1998 in markets where they are already strong, such as the UK.
The weak Korean won will help Daewoo and Hyundai. Japanese and Korean sales grew twice as quickly as Europe's market in 1997.