Tough times for car industry ahead of Geneva Motor Show

Tough times for car industry ahead of Geneva Motor Show

The IMF has dropped its world growth forecast to 3.3% while eurozone,bogged down in public debt crisis.

Over-capacity,price pressures and carmaker tie-ups,like the one just announced by General Motors and PSA Peugeot Citroen,will likely cast a shadow at the 82nd Geneva International Motor Show this week.

Motoring fans,amateur enthusiasts and industry professionals alike,will of course revel in the presence of about 700 automakers at the 10-day event which opens to the public on Thursday.

But the exhibition,the second biggest of the year after the Detroit Auto Show in the United States in January,will not be able to escape the effects of a struggling world economy and over-capacity.

The International Monetary Fund (IMF) has dropped its world growth forecast to 3.3 per cent while the eurozone,bogged down in the public debt crisis,even risks plunging into recession.


“Over-capacity,relentless competition and heavy price pressure are compounded by the extremely tough environment with declining consumer and corporate confidence in several European markets,” said analysts at ratings agency Fitch.

“Another harsh economic downturn or a persistent weakness in auto sales in Europe is likely to trigger more drastic moves from some selected manufacturers.”

Mergers,acquisitions,restructuring and some plant closures cannot be ruled out this year,the agency said,as adverse conditions persist and put further pressure on companies’ revenue and profitability.

The health of the industry varies widely across the globe however.

Sales of cars and commercial vehicles are set to grow 7.7 per cent this year,according to Standard & Poor’s (S&P).

Within this,Asia continues to be the strongest region,with an expected sales growth of 10.9 per cent,followed by North America (10.6 per cent).

In western Europe sales are meanwhile expected to stagnate at minus 0.4 per cent.

For European carmakers the situation is less dramatic than during the 2009 financial crisis,notably for world number two Volkswagen which enjoys almost half its sales in emerging markets.

The Wolfsburg group hopes to sell three million vehicles in China and one million units in North America from now to 2018,while French firm PSA Peugeot Citroen is equipping itself with a second joint venture in China and plans to open a site in India.

In terms of vehicle registrations in Europe,the picture again varies widely.