MILAN -- Western Europe's 7 percent first-quarter rise in new-car sales has some market watchers adjusting their full-year forecasts upward while others are more cautious.
The consensus among automaker executives and analysts is that the recovery is underway but economic risks remain and profit-robbing car discounting continues.
Mass-market automakers such as Ford Motor, General Motors' Opel, Fiat and PSA/Peugeot Citroen have combined to lose billions of euros annually in Europe during the region's six-year slump in new-car sales. They got some relief as customers started returning to showrooms in the first quarter.
"The recovery seems to be on track," Ian Fletcher, a senior analyst at IHS Automotive, said. "It bodes well for those carmakers that are targeting a return to profit in Europe for 2015 or 2016."
IHS is sticking to its 2.4 percent sales increase for 2014 for western Europe. Meanwhile, strong March sales in the UK prompted consultancy LMC Automotive to increase its growth forecast for western Europe to 3.5 percent for the full year, from 2.5 percent at the start of the year.
Forecasters point out, however, that the recovery is weak, and patchy. The EU economy is seen growing 1.5 percent this year, compared with 2.6 percent in the United States.
In southern Europe, record unemployment in Italy and Spain means that the economy isn't strong enough yet for people to feel secure about making a monthly payment on a new car, forecasters said. That means carmakers in southern Europe are still offering deep discounts, according to reports. Rebates and other incentives are also prevalent in Germany, Europe's largest market.
Moreover, this year's bounce takes place in a market where about 4 million fewer cars are sold annually than at the 2007 pre-crisis peak. European car sales in 2013, including central and eastern Europe, were 12.3 million, according to ACEA, compared with about 16 million in 2007.
"The year-on-year comparison is still very weak," Jonathon Poskitt, head of sales forecasting for Europe at LMC Automotive, said. "What's critical is how these economies move into recovery mode going forward and how they deal with unemployment."