WHERE DID WE GET TO?
THE CAR MARKET
It was an extremely difficult start of the year for the Italian car market and it looks as though it won’t even be able to match the already negative figures of 2011. And the situation is not much better in the rest of Europe
DO YOU REMEMBER 2010? It was the year of the virulent explosion of the crisis in Italy, the toughest time which, according to the majority of economists, should have been the height of the recession. As the months went by, it started to get better. We remember well how things went.
Subsequently, the most cautious economic analysts were reluctant to commit themselves but indicated a turning point in the second six months of 2011. There would be a slow but certain recovery in all the main sectors of the economy, from the most traditional to the most innovative, that had been only slightly affected by economic problems.
But, here too, we know how things went and are continuing, if the “sample” of the first months of 2012 is anything to go by.
Now no one dares to forecast how it will end, because it is clear to everyone that the moment is being revealed as one in which prospects for economic growth are guaranteed only for those countries that began from a position of objective backwardness, but with enormous natural and demographic resources, and now have all the preconditions that the western world does not.
The long descent of the car
All this obviously affects the car market, a strategic sector for many countries and often considered to be an indicator of which way the wind is blowing. A bad wind by all accounts.
From a national viewpoint, the patient is not doing well, even at European level. And the figures, which we will look at further on, seem to leave no doubt about what awaits our continent in 2012.
We’ll begin with Italy. After closing 2011 with an 11% downturn in registrations compared with 2010, and even a symptomatic -17.4% if we consider only sales to individuals, the negative trend of the domestic car market was confirmed also in the first two months of the new year.
January closed with a total of only 137,119 registrations which, compared with the 165,073 in the same month of the previous year – when volumes were already very low – imply a falloff of 16.9%.
Incredibly, February’s total was even more negative with a downturn of 18.9% compared with February 2011 and volumes were only slightly over 130,600 units.
For the first two months of 2012, total registrations were about 268,000 units, a decrease of 17.8% compared with the same period in 2011, when over 326,000 new cars were registered.
Numbers that invite reflection. And, for the time being at least, I would suggest not making any projections for the entire year as they would reveal that in terms of sales volumes we have regressed by at least 30 years.
Europe marks time
It’s not only Italy that isn’t selling cars. Throughout the continent registrations dropped considerably in January (-6.6%) and in February (-9.2%). In the EU27+EFTA area, registrations in the first two months of 2012 totalled 1,927,113 units, a 7.8% drop compared with the same period last year, despite the fact that most countries worked an extra day in both months.
The data published by Acea show that in February the trend was negative in all five major markets (Germany, France, Italy, United Kingdom and Spain) and in the majority of small markets. Specifically, total registrations dropped by 10.4% in the five major countries and by 7.6% in all the other countries taken together. What is most striking about the major markets is the fact that even the German locomotive, which supported total sales in the EU27+EFTA area in 2011, came to a halt and had zero growth in the first two months of 2012. The downturn is strong in France (-20.2%) and there was a slight downturn in already very depressed 2011 levels in the United Kingdom (-2.5%) and Spain (-2.1%).
This trend might seem to be in sharp contrast with the highly positive image conveyed by the many new developments the car industry presented at the recent Geneva Motor Show, and also with the fact that the majority of German manufacturers announced sizeable production bonuses for all their employees at home because of the excellent results achieved in 2011.
Positive indications that are, unfortunately, inconsistent with too many unfavourable symptoms.
The many negative signs
To avoid making an over-simplistic analysis that would justify the entire crisis totem, with regard to the domestic market it should be pointed out that there are many critical factors which strongly suggest that Italians should think twice before they change their car, which has a negative effect on a recovery in demand.
According to the preliminary estimates provided by ISTAT, in February the national consumer price index rose by 0.4% compared with the previous month, and by 3.3% compared with February 2011. The rise in prices refers in particular to unregulated energy (+1.7% at economic situation level and +17% at trend level) with increases for all fuels: petrol by +2.1% against January 2012 and +18.7% against February 2011, and diesel by +1.3% and +25.4%, respectively. Factors that have a considerable effect on car use, with the risk that costs will be increasingly difficult to sustain.
Also according to ISTAT, in February consumer confidence rose (from 91.8 to 94.2), but, as far as durable goods are concerned, opinions about the convenience of buying immediately were down (from -88 to -100) as was the intention to buy in the near future (from -68 to -75).
It is clear that the labour market also had a substantial effect on family income prospects and, as a consequence, on consumption, especially with reference to durable goods like cars.
Many people still dream of having a new car, but because of the general atmosphere the majority of potential customers stay away from dealerships, or at least postpone buying until better times.
• World: the importance of emerging countries
The world car market is anything but negative, but the situation must be seen through a lens that picks out the real main players in the sector.
And in fact without the emerging countries (China, India, Brazil and Russia in particular), the four-wheel industry would have collapsed, or almost. In Russia, registrations grew by a whopping 39%. In China, it was “only” 5.2%, but after a race that doubled sales figures in the past four years. India and Brazil consolidated their excellent results of 2010.
We already mentioned the problems in Europe. Only the United States had an 8.9% increase in car registrations, whereas in Japan the downturn was substantial due to the nuclear disaster a year ago.
It is remarkable how much the world car market has changed in ten years. At the start of the millennium, 83% of sales were in more industrialized countries, but it took only a decade to bring that figure down to 55%. And in the coming years the percentage will drop a lot more.
• The risks of a too-fragmented market
In 2011, Italy spent almost € 31 billion on buying 1,750,000 new cars. A figure that is considerably lower than the € 33.4 billion of 2010. If the market stabilizes at this level, and this is an optimistic hypothesis, the immediate consequence will be a deficit of € 10 billion in the turnover for which the system is structured. Assuming the sales margin is 5%, there will be € 500 million less to cover the dealerships’ costs; in other words, € 137,000 for each of the 3,700 dealers currently operating in Italy. So, as Unrae estimated, it is probable that about 10,000 people are at risk of losing their jobs. Without doubt, the sale of cars has pockets of inefficiency to be dealt with, first and foremost the high fragmentation of structures. One idea could be to form a consortium of all the dealerships in every province for the purchase and management of a common space. This would create a kind of car citadel with reference brands obviously kept separate. But this is the land of localism...