Daimler cuts car market forecast as Europe wobbles

Thu Oct 2, 2014 7:35am EDT
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By Edward Taylor and Laurence Frost

PARIS (Reuters) - German luxury automaker Daimler (DAIGn.DE: Quote) has cut its growth forecast for the global car market, blaming cooler demand in emerging markets and a plunge in Russian sales which has put a fledgling European industry recovery in jeopardy.

Speaking as the Paris auto show opened to the media on Thursday, Daimler chief executive Dieter Zetsche said he now expected the global car market to grow by 3-4 percent this year, down from a previous forecast of 4-5 percent.

Other executives shared his caution, particularly over Europe where a six-year sales slump has left demand around 20 percent below pre-crisis levels and sluggish economies have put a question mark over whether the gap will close anytime soon.

"Perhaps we will arrive at 13 million or 13.5 million (overall vehicle sales in Europe). But the market won't return to (the pre-crisis level of) 15.5 million, I'm sure of it," Martin Winterkorn, the chief executive of Europe's biggest carmaker Volkswagen (VOWG_p.DE: Quote), said on the eve of the show.

Europe's car market has returned to growth this year, although widespread incentives for buyers and government subsidy schemes in some countries have made it difficult to gauge the strength of underlying demand.

A source familiar with the matter told Reuters that car sales in Germany rose by more than 5 percent in September, bouncing back from a decline in August and giving a year-to-date increase of 2.9 percent.

But demand has been erratic and executives are particularly concerned about Russia -- once tipped to overtake Germany as Europe's largest auto market -- where new car sales tumbled 26 percent year-on-year in August due to a slowing economy hit by Western sanctions over the crisis in Ukraine.

"Earlier this year, momentum was at the upper end of expectations but it's flattening out a bit," Ford Europe (F.N: Quote) Chief Executive Stephen Odell told reporters, referring to the broader European market.   Continued...

A worker fixes a car bonnet emblem as he assembles a Mercedes-Benz C-class model at their plant in Sindelfingen near Stuttgart February 5, 2013.  REUTERS/Michael Dalder