FRANKFURT/DETROIT (Reuters) - Europe’s car market may have finally stopped shrinking, but pricing pressure will remain fierce until sales volume picks up considerably, a senior executive at U.S. carmaker Ford (F.N) told Reuters.
While industry executives believe the worst is now behind them and second-quarter results showed carmakers have a handle on costs, they have little choice but to offer profit-sapping incentives and discounts to underpin sales.
“From a pricing perspective I‘m not seeing any relief at the moment yet,” Ford Europe sales chief Roelant de Waard said in an interview after reporting sales in the company’s 19 core European markets rose 8.7 percent to 90,000 vehicles in July.
“All customers seem to be aware that we are in a recession - as an industry, as a region - so they’re expecting very good deals.”
Confidential market research seen by Reuters indicated that discounts by mass-market car brands jumped 17 percent from a year earlier to an average 2,518 euros per vehicle in May across Europe’s five biggest markets.
De Waard said much of the problem stemmed from unused manufacturing capacity - car plants were able to produce in excess of 4 million vehicles beyond what was required to meet European demand.
“We come from an industry of 18 million and even at that level there was overcapacity. And while there has been activity by us and our competitors to adjust capacity, that capacity will take a while before it’s actually gone - it’s really the end of next year that the first plants really close,” said de Waard.
Ford, which estimates its pre-tax loss in Europe will be stable at about $1.8 billion this year, recently closed two smaller manufacturing operations in the UK and plans to shut its Genk car plant in Belgium at the end of next year.
Reporting by Christiaan Hetzner and Deepa Seetharaman; editing by Maria Sheahan and Tom Pfeiffer