PARIS -- European car company chiefs expect government budget cuts to discourage consumers from making large purchases next year, dampening hope that the region's car sales will recover from a bad 2010.
Renault CEO Carlos Ghosn said at the Paris auto show last week that the region's automotive market may shrink by 2 percent in 2011 after a contraction this year. Renault in July forecast a European market slump this year of as much as 9 percent.
Fiat S.p.A. CEO Sergio Marchionne said 2011 will not be worse than this year, but it will not be any better. He expects western European car sales of 12.5 million next year, about the same as this year, with a weak first quarter compared with the first quarter this year when sales were inflated by scrapping incentives in key European markets.
Ford of Europe CEO Stephen Odell said: "We are probably in for a slow continued recovery around all markets. But there will probably be some austerity measures in some countries that will change that outlook."
Hyundai Europe Vice President Allan Rushforth said it would be 2014 before Europe's car market returned to pre-crisis levels of 2007.
"Austerity measures will reduce the rate of growth in Europe, it will reduce confidence and reduce the sales recovery. It will still progressive but just at a slower pace,” Rushforth said.
Opel's sales and marketing chief, Alain Visser, said Europe is seeing the first signs of recovery, but 2011 will be a relatively weak year. "We only really see things improving starting in 2012. However, I would be very careful about basing a business plan on the recovery of the industry (to pre-crisis levels). If that happens, then it's a plus," he said.
Automakers in Europe have been braced for pain after scrappage incentive schemes introduced in many countries to spur demand during the financial crisis ended at the same time as governments are putting together tough public spending cuts loom to cut deficits.
“If you're a public employee, you've got to be wondering if you're still going to have a job at the end of the year,” Arthur Maher, head of European automotive forecasting at J.D. Power in Oxford, England, said. “That might make you hold onto your old car rather than getting a new one. Income growth and confidence are the main drivers of car purchases.”
Overcapacity in Europe's auto industry will amount to 5.5 million cars at the end of 2010, Calum MacRae, head of PricewaterhouseCoopers' Autofacts forecasting unit, said at the Paris show. That compares with 6.5 million vehicles of excess capacity in January that MacRae estimated.
Sven Diermeier, an analyst at Independent Research GmbH in Frankfurt, said there is "significant production overhang," adding "particularly manufacturers with already weak margins will have to lower capacity.”