European car markets are heading for further pain as EU countries implement measures to tackle their financial deficits, a market researcher warns.
New-car sales will be hard hit this year and in 2011 as governments follow Greece and launch "swift and sustained" attacks on national fiscal deficits that will result in public sector job losses, wage freezes and cuts, cancellation of government-funded private sector contracts and tax increases, says J.D. Power Automotive Forecasting.
"Consumer confidence, which held up relatively well during the earlier phase of the Greek crisis, is now on a downward trajectory once more with negative implications for car sales," the forecaster said in a commentary on a 6.4 percent fall in new-car sales in western Europe in June.
In Greece, the government's tough cost-saving measures led to a nearly 40 percent decline in car sales last month. The effect of austerity measures in other European countries may not be as immediate as in Greece, but it will come -- and will be felt most severely in 2011, according to the forecaster.
"The risks of a widespread fiscal consolidation are serious, increasing the probability of a double-dip recession in some countries," J.D. Power says.
And in a dismaying prediction for automakers hoping the European market would finally return to sustained growth next year, the forecaster concludes that western Europe's car market in 2011 is unlikely to be above its current prediction of 12.86 million units for 2010.