Western Europe's car market is likely to be flat next year after a steep drop in 2012, according to ratings agency Standard & Poor's.
This year, the region's car and light-truck sales volumes are set to decline for the fifth consecutive year by as much as 7 percent, the agency said.
"We expect the western European market to decline about 13.4 million vehicles in 2012 and to grow by an anemic 0.4 percent next year," Eric Tanguy, Director of Corporate Ratings, told Automotive News Europe.
Tanguy said declining sales are not a one-off, seasonal effect and will likely linger into 2013. The figures reflect a fundamental trend in the car market for the year driven by the overall macro-economic outlook in Europe and recent announcements of austerity packages in several countries.
"We would expect this to continue for the rest of 2012 and probably into 2013," Tanguy said.
on Monday, another ratings agency, Moody's, said it expects that light-vehicle demand in western Europe will decline by 3 percent next year with demand continuing to fall heavily in weak southern European markets such as Italy. In January, Moody's had forecast 3 percent growth for the region.
Industry association ACEA estimates that European car sales may decline by 8 percent this year, or by 10 percent in a worst case scenario. Its forecast came after new-car registrations in Europe fell 8.9 percent in August from a year earlier, on top of a 7.8 percent decrease in July.
"August is traditionally a slow month but these are the lowest figures recorded by ACEA for the month of August since it started collecting such data in 1990," an ACEA spokeswoman said.
European new-car registrations are down 7.1 percent for the first eight months and have now fallen for 11 consecutive months, according to ACEA.
Trouble ahead for PSA, Renault and Fiat
Standard & Poor's said Europe's weak market will continue to present obstacles for PSA/Peugeot-Citroen, Fiat and Renault, whose ratings are all in the speculative-grade category.
"Weak demand, along with high operating leverage and fierce price competition in small car segments, could put the brakes on results and hamper free operating cash flow," Tanguy said in a report.
"We believe the performance and ratings of Fiat, Peugeot, and Renault this year and next will depend on their ability to find growth and, more importantly, profitability outside of historical western European markets," he said.
The automakers also need to address plant underutilization in western Europe and manage a still-high cost base, while defending market share against non-European players," Tanguy said.
Reuters contributed to this report