Vehicle sales in France are expected to fall 6.9 percent in 2013 to 1.77 million passenger cars, as forecasted by IHS Automotive. In fact, vehicles sales in the country have fallen deeper than in any other major market in Europe so far this year. Vehicles sales in France dropped 11 percent in the first half of 2013, compared to 10 percent in Italy, 8.1 percent in Germany, and 4.9 percent in Spain.
The falling demand for vehicles in France has been attributed to rising unemployment as well as record-low consumer confidence. According to the national statistics office Insee, over 3.26 million people are jobless in France, placing the unemployment rate in the country at 10.8 percent. Likewise consumer spending power has been weakened by a EUR70 billion tax increase over the past three years. Without any job to finance large-scale purchases, a good part of the country’s population cannot afford to acquire new vehicles.
A situation like this has been the source for headache for French carmakers Renault and PSA/Peugeot-Citroen, and they could be feeling more pain in the second half of the year. Florent Couvreur, an analyst at CM-CIC Securities, told Bloomberg that higher taxes are set to weaken demand in France further. He noted that vehicle sales in France “haven't hit the floor” yet. Couvreur expects the French vehicle market to fall as low as 1.5 million vehicles.
Vehicle sales in France in 2012 dropped 14 percent, according to CCFA, the country's automakers' association. PSA and Renault combined control 55 percent of the French vehicle market, followed by German carmaker Volkswagen at 12 percent, according to CCFA. Aschenbroich, chief executive of French supplier Valeo told Bloomberg that the French market “isn't yet stabilized."