A tough market in Europe – but what is going on across the globe in 2012?
The first quarter sales results from around the world confirm several trends, and unearth some more worrying ones too. Sales of ultra-luxury vehicles go from strength to strength as Bentley achieve new record volumes and Rolls-Royce exceed the previous record set in 1978 with no sign of demand easing. This first quarter of 2012 confirmed China as the world’s biggest market for Bentley pushing the USA into second place.
However the more interesting and potentially more explosive issues are going on in the volume manufacturers. At the high end Mercedes-Benz, BMW and Audi continue their quest to beat each other and to beat everyone else, but there are signs that whilst they will remain profitable even if demand reduces they are having to use larger than usual incentives to get customers into their cars in some markets. Add to that the change in Chinese Government Official car purchase rules brought into play at the start of 2012, and it is likely the best this sector can expect is the same level of sales as seen in 2011 (ie, pretty strong). All three of these companies have ambitious expansion plans, so a flat market could prove to be slightly challenging.
The three stalwarts of the luxury sector – Audi A4 (B8), Mercedes-Benz C class (W204) and the latest entrant – the new BMW 3 series saloon / sedan (F30). The competition between these three companies is very strong which produces ever greater refinement, build quality and performance. Why compete? Without that all of these companies know they will fall behind and gradually decay. © BMW AG, Daimler AG, Audi AG
The emerging markets will be China with around 5% increase in vehicle sales volume for this year and Russia. Brazil has industrial growing pains with potential inflation whilst India has so far refused to grow at the same pace at 2011. Established markets such as the USA have seen a record rate of sales in March 2012, aided by relaxation of finance rules which has attracted fewer top flight credit risk customers but many more ‘higher’ credit rating risk customers. Will this be sustained? No one is sure.
Europe is the second largest single market after China, and right now in the worst shape. Whilst Germany powers ahead with purchasing not only more cars, but more executive/ luxury vehicles, whilst other states in the Union are not doing well. In France the contraction has been running at 21.7% lower than the first quarter of 2011, which is to be expected since the scrappage scheme ran well into 2011 – so this is an understandable correction. Greece, Spain and Italy are not doing well at all. Italy was the third largest car market inside the European Union, and this has seen a net sales decrease of 20%. For manufacturers such as Renault, Peugeot, Opel / Vauxhall and even Fiat – the problem is their non EU sales markets are mainly South America, and simply not growing fast enough to offset sales decreases inside Europe.
What does this matter to the European after market?
For the repairer: There may be short term gain as customers seek to patch up older vehicles because new vehicle sales are depressed. The bigger issue is that certain brands will delay new vehicles yet again as their finances become super critical. For those specialising in those European centric brands it may be time to seek brands that have a broader global presence.
For the Insurer: Confused launch dates, billing of minor facelifts as ‘all new’ and delay of new products will add to the potential confusion caused by the increased rate of product development – for not all vehicle manufacturers will do this. Only those with critical finances will indulge in this practice. It means checking out each new vehicle announcement is more critical than ever before.
One thing is clear – any vehicle manufacturer delaying new technology introductions is compromising their own future. When money is tight, perhaps there is no other choice.
