To read the recent Forbes article entitled "For Europe's Car Makers, Stagnation Replaces Decline, As Geneva Show Beckons", one might get the impression that there is still a lot of over-capacity in the European market, particularly Western Europe. The article by Neil Winton argues that while Germany's Volkswagen re-structured, many other companies – such as Peugeot-Citroen which had to be bailed out by the French government and a Chinese firm – have failed to do so.
However, there are some rays of sunshine for the European car market. Peugeot itself has won the coveted European Car of the Year Award and will soon start production of it in China, as well as in its historic home of Socheux, France.
And this is against a backdrop of increasing car sales across Europe, which rose by 5.1 per cent in February.
Unemployment – and especially youth unemployment – is often cited as a reason for low demand. But recent figures cast doubt on this, as Spain saw year on year sales grow by 17.8 per cent. This is all the more impressive when you consider that youth unemployment is 55 per cent and overall unemployment is nearly 26 per cent.
Subsidies
But special incentives have helped boost sales figures in Spain, which contrast sharply with France's year-on-year decrease in sales of 1.4 per cent.
The Spanish subsidy scheme called PIVE gives buyers of new cars a 2,000 euro rebate – if they get rid of an older car. Half of this sum is met by the manufacturer and half by the government.
The outlook for Europe
Estimated figures from IHS Automotive suggest that sales will grow 2.7 per cent in 2014 compared to last year across the EU. A respectable figure and a lot better than the peak of the financial crisis when vehicle sales broke down completely.
There is still a long way to go, however, before pre-crisis sales figures are seen. Car makers must sell 3 million additional units a year to return to those heady days.
Perhaps Spain’s subsidy scheme should be rolled out in other European countries?
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