Auto recovery wobbles in Paris show spotlight

Tue Sep 30, 2014 9:13am EDT
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By Laurence Frost

PARIS (Reuters) - Europe's anemic car market rebound could be over before it has really begun. That is the fear of executives as they gather for the Paris auto show opening on Thursday, the biggest industry event in the regional calendar.

While U.S. and Japanese car sales are back at pre-crisis levels, Europe is still 20 percent below its 2007 peak.

Carmakers are rolling out new models in anticipation of closing the gap -- the Paris show floor will be bristling with fuel-efficient small cars and compact SUVs.

But a tentative recovery following a six-year slump is looking increasingly fragile. And this time there is little relief to be had elsewhere, with Chinese demand cooling, Russian sales in freefall and other emerging markets in sharp decline.

"Few plants have been closed, headcount levels remain high, and R&D budgets have largely been left intact to ensure a future product pipeline," Bernstein analyst Max Warburton said. "The industry is just sitting tight hoping for a brighter future."

It may have to wait a while.

At the end of this decade, European demand will still be 1 million vehicles short of its pre-2008 average, according to forecaster IHS Automotive.

"This recovery has always had shaky foundations," said IHS analyst Ian Fletcher, who sees European market growth slowing to 3 percent next year after a 4.6 percent spurt in 2014.   Continued...

An aerial view shows cars parked at the port of Montoir-de-Bretagne near Saint-Nazaire, western France, September 22, 2014.  REUTERS/Stephane Mahe