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04/04/2014
SWALLOWS THAT DO NOT MAKE A SPRING

Car Market


Third consecutive positive sign for the national car market, although economical instability and governmental policies are still too weak and detrimental to be able to talk about  recovery

Renzo Dotti

Understanding the dynamics of the automotive market, its numbers and its evolution may appear in the eyes of many as a simple exercise centred on a comparison of data. Official ones, published monthly by the Ministry of Infrastructure and Transport, tells us of a sector that seems to be giving some tentative signs of recovery, after years of negative trend.

Now that for three consecutive months the trend has been reversed, the temptation, especially by sectors of the media, is to talk about recovery, or at least a significant reversal of a trend, that by simply comparing last year’s results certainly cannot be denied. But is it enough?

 



Disappointing figures


According to information released by the Ministry of Infrastructure and Transport, in February, the Italian car market has reached 118,328 new registrations, 8.6 % more compared to February last year that  closed with a negative record of 108,963 units.In the first two months of 2014 the total registered volume was 236,500 units, an increase of 6% compared to the first two months of 2013.Despite these positive signs since December last year, to speak of a speeding up of the car market, as pompously reported in some articles, is rather partial if not unrealistic, as the sector is still suffering terribly the consequences of the economic crisis .What is significant, as evidenced by Federauto, the association representing dealers of all brands of cars, commercial vehicles and buses marketed in Italy, is that our automotive system, litmus test of the whole economy made up of thousands of companies and hundreds of thousands of workers, is able to cope with a  market recording just 2,000,000 new registrations per year.These numbers appear justified as the current running fleet of approximately 35,000,000 vehicles  needs a thorough renovation aimed at improving safety, reducing pollution as well as lowering running costs. To reach this “survival” threshold of 2,000,000 units, a steady double digit increase would be required.What is very indicative is the fact that the volume of registrations recorded in February are still lower by more than 54,000 compared to the average of the past 13 years for the same month (2002-2014: 172 371 units). Really, than, stronger signals are needed if we are  to speak of a recovery.

 



High expenses don’t help


In the past three years, as we know, sales have dropped to levels unseen for over thirty years. But even in 2014, if  the initial rate will be confirmed during the year, the distance that separates us from the sales targets coveted by most dealers will certainly not be reduced significantly.And it couldn’t be otherwise, given the serious economic situation that is gripping the country in a vice from which we would probably  be delivered only with a serious economic reform for the sector that at the moment appears light years away.Requests by Anfia and other associations, to produce the conditions for a real turnaround, consist in a set of conditions, among which of course the reduction of tax pressure on motorists especially in relation to the management and vehicles running costs. In the presence of a more moderate taxation, in fact, the belief of all is that the market will certainly gain in stability. Another prerequisite is to act in support of the production chain, guaranteeing a reduction in the cost of energy, supporting exports and encouraging research and development. These are considered the main areas to work on if renewed competitiveness by companies and the whole industry must ensure a true recovery.

 


High expenses don’t help


In the past three years, as we know, sales have dropped to levels unseen for over thirty years. But even in 2014, if  the initial rate will be confirmed during the year, the distance that separates us from the sales targets coveted by most dealers will certainly not be reduced significantly.And it couldn’t be otherwise, given the serious economic situation that is gripping the country in a vice from which we would probably  be delivered only with a serious economic reform for the sector that at the moment appears light years away.Requests by Anfia and other associations, to produce the conditions for a real turnaround, consist in a set of conditions, among which of course the reduction of tax pressure on motorists especially in relation to the management and vehicles running costs. In the presence of a more moderate taxation, in fact, the belief of all is that the market will certainly gain in stability. Another prerequisite is to act in support of the production chain, guaranteeing a reduction in the cost of energy, supporting exports and encouraging research and development. These are considered the main areas to work on if renewed competitiveness by companies and the whole industry must ensure a true recovery.

 

 

Crisis; how buyers and buying changes

The economic slump is reflected in the average age group  of new car buyers: in recent years the "over 45" group has grown in percentage due to a more stable financial position, while younger people (18-29 years) as well as slightly older ones (30-45 years) have declined significantly, to confirm greater difficulties in dealing with the running costs of a car and access to credit.In analyzing the Italian car market, another interesting and not to be neglected area, is that of  sales variations depending on the type of fuel.
The increase in fuel prices and the economic downturn has pushed buyers towards alternative engines, with a gradual reduction in the importance of petrol engines decreased from 36.2% of the total market in 2010 to 30.8% in 2013.On a fluctuating increase on the other hand are diesel engines, that represented 45,9% of the market in 2010 and reached 53,9% at the end of 2013. Among  alternative fuels LPG, while still representing around 9% of the market , seems to be affected by the increased range of products with natural gas that continues to grow in double-digit figures thanks to a greater range of models offered on the market.Very important, but limited from a production and economical stand point, is the increase in hybrid powered cars (+118.3% at end of 2013) while the market  for electric cars is still stagnant due to a lack of measures to incentive it’s full potential and development. Meanwhile, the current Italian fleet shows the obvious effect of  gradual aging, the average age of vehicles being of 10 years.  Another sign that, while on the one hand, points to a necessary change, therefore new registrations, on the other provides, if ever it were needed, further evidence of the difficulties we are experiencing.

 

 

 

•  LUXURY CARS, THE SUPER CAR TAX FLOP

When it was issued by the Monti government, the decree Salva Italia (Save Italy), seemed to be one of the most “ethically acceptable” measures : the so-called Superbollo (super car tax) aimed at vehicles with more than 185 kW with the payment of 20 € per kW over that threshold, would in fact, hit those who certainly had no money problems providing more revenue to the state.

But they forgot the most important thing, a migration of luxury cars over the border meant that the revenue would not be guaranteed and actually seems to have greatly reduced.

According to some studies, the elimination of the surcharge would have a very limited impact on revenues in the short term and may instead provide increased revenues for the state in the medium term. But apart from any decision that will be taken by the government, perhaps it would be fairer to base the calculation of the superbollo not on power, but on the actual value of the car.

 

 

•  3 RECESSIONS IN 35 YEARS, THE LAST BEING THE WORST

The Unrae, the association of foreign brands operating in Italy  in the "automotive" sector , has produced in it’s 2013 "book" a general analysis of the Italian market in 35 years affected by 3 deep recessions. In 1983, due to economic stagnation and a high rate of inflation, the market had a sudden drop of 400,000 units (-21.6%) and it took four years to return to the previous numbers.

Ten years later, in 1993, there was an even greater fall in registrations, with the contemporary devaluation of the lira, the compulsory levy on current accounts and the collapse of the tertiary sector, with a market decline of 686,000 units (-28.8 %).

That recession also lasted four years and was  overcome only thanks to the scrapping scheme. After this period of recession, the market has remained stable for 11 years above the 2,250,000 vehicles registered. The latest crisis, the most serious and ongoing, is the one which began in 2007, compared to which in 2013 there were 1,190,000 less registered cars (-48%), of which over 100,000 in 2013 alone.

 

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