Capacity utilization at Europe's vehicle plants should rise to 70 percent this year because of factory closures and rising sales, and may return to 80 percent as soon as 2016, say forecasters. A return to the 2007 high of 85 percent, however, is not expected until 2020 – if ever – forecasters say. "Our prediction is that capacity utilization will increase, but it won't come back to peak levels of 2007," said Michel Costes, CEO of France-based automotive research group Inovev.
This year's expected improvement to 70 percent capacity usage from 68 percent in 2013 is encouraging, but it's still a long way from 80 percent to 85 percent that experts say is necessary for carmakers to run their plants profitably.
PwC's Autofacts unit said in a recent report that capacity utilization could exceed 80 percent in some European regions by 2016 – bolstering claims by money-losing mass-market producers that say they will bring their operations back into the black. Ford says its Europe unit will be profitable again next year while General Motors' Opel division and PSA/Peugeot-Citroen promise to stop losing money by 2016. Capacity utilization by all three was 60 percent or less in 2013.
“Given the increase in car sales from the 2013 trough, as well as plant closures and re-localization, capacity utilization could continue to improve going forward,” PwC Senior Manager Michael Gartside said.
This year’s planned closure of GM’s plant in Bochum, Germany, and Ford’s factory in Genk, Belgium, along with the recovery of car sales in Europe should improve the region’s capacity utilization by a couple of percentage points, Inovev forecast in a recent report. PwC says that the combined five European plant closures in 2013 and 2014 will reduce capacity by 650,000 units and that relocalization from other regions will add 550,000 cars.
A slight recovery in car sales will help ease the burden of too much manufacturing capacity, but not enough to make a big difference to carmakers’ bottom lines this year. “We still have a market with 20 million units of capacity and about 14 million sales,” Ford of Europe CEO Steve Odell told Automotive News Europe.