Auto execs still expect European price war this year

Article by Andrew Christian, on March 17, 2014

Most auto executives still expects a current price war to continue in Europe even after six consecutive months of sales increases in western Europe and despite forecasts of a 3-percent surge in volume in the region this year. In fact, registrations remain at about 20 percent below their pre-crisis peak. "It's too soon to start singing the victory march," Fiat Chrysler Automobile chief executive Sergio Marchionne said.

He remarked that recovery is driven more by fleet and rental sales rather than by retail demand. Analysts have said that self-registrations by dealers artificially inflate sales aimed at allowing them to achieve internal volume targets, especially in December and January.

When asked at the Geneva auto show whether the price war would end this year, Volkswagen Group CEO Martin Winterkorn said: "No." Only Renault and Daimler managed to hike market share in 2013. Renault’s performance was boosted its low-cost Dacia models while Mercedes-Benz was supported by its compact cars like the A class and B class.

Volkswagen, BMW, Toyota and Hyundai-Kia all posted drops lower than the market's 2 percent fall in 2013. Ford, General Motors, Fiat and PSA/Peugeot-Citroen lost sales and market share in Europe last year. Dealers have been forced to offer discounts on their vehicles as demand remains weak in relation to production capacity.

Carmaker sources told Automotive News Europe that dealers are cutting sticker prices by 11 percent to 12 percent on average. "In the first two months there has been no change in the pricing arena," Ford of Europe CEO Stephen Odell told Bloomberg in an interview.

He noted that the European market has a production capacity of about 20 million but only sales of 14 million. “From an industry perspective, we would need a significant shift in demand to see everyone turn back the spigot a bit" [on discounts]. [source: automotive news - sub. required]

Topics: audi, europe

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