Incentives Offer Hope for Auto Sector

Aug. 3, 2009
Positive data is dependent largely on temporary government bonus schemes, say analysts.

Rising car sales are offering a glimmer of hope for the depressed world auto sector but analysts point out that the positive data is dependent largely on temporary government bonus schemes.

The auto sector was one of the first to be hit by the global economic crisis because of a collapse in demand for cars and it is being closely watched by economists as an indicator for any signs of economic recovery.

France offered an upbeat assessment of the car market on August 3, with the main auto manufacturers' group, the CCFA, reporting a 3.1% increase in new car sales in July from the same month last year. Sales at France's biggest carmaker PSA Peugeot Citroen posted an impressive 11.4% rise and Renault sales jumped by 18.5%.

But Guillaume Mouren, an analyst at market research company Xerfi, warned sales would fall after a government bonus scheme runs out later this year. "Even if the bonus scheme is phased out gradually, there's still going to be a big fall next year," he said. "French people want to take advantage of the highest bonus and put in their orders before December 31."

Like many major economies including Germany and the U.S., France has put in place a bonus scheme for car buyers to trade in their old models in a drive to boost sales and promote more eco-friendly transport.

Germany in particular has seen a boom in car sales this year because of the scheme and its auto manufacturing federation was due to publish figures expected to show another rise in registrations for July.

Spain meanwhile is continuing to see a drop in sales year-on-year, although it is less steep than before, the ANFAC manufacturers association said on August 3. ANFAC said the latest figures, showing a total of 108,222 vehicles were registered in Spain in July, mark a "continuation of the slowdown of the decline" due to "the positive effects of direct aid on the market."

And in the U.S., Ford said on August 2 it had sold more cars in July than in July 2008 thanks to a cash-for-clunkers program that was extended by the US House of Representatives with extra funding last week.

Fellow auto giant General Motors said on August 3 its sales in China jumped 77.7% last month from a year earlier to 144,593 units. "This was GM China's best July ever, extending an uninterrupted series of single month sales records that started in January 2009," the company said.

The picture for the world auto industry is still far from rosy however.

European and Japanese carmakers including Daimler, PSA Peugeot Citroen and Honda, last week reported dismal results owing to the economic crisis although they remained upbeat about the prospects for a recovery this year.

Hopes for the auto sector are focused mainly on a recovery in Western markets and growth in key emerging economies such as China and India, while once-booming markets in Eastern Europe are still struggling with recession.

Russia's main car maker, Avtovaz, was reported last week to be considering cutting up to a quarter of its 110,000 workforce and the Czech Republic on August 3 reported a 10.9% contraction in car output so far this year.

Copyright Agence France-Presse, 2009

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