Scrappage schemes failed to help European markets recover…
In Italy, new vehicle sales fell by nearly 20% following the end of their scrappage scheme, while in France sales declined by 6.3% – even though s had grown in the years preceding the schemes. A new report from Verdict Research reveals what has gone wrong.
LONDON – Thursday, 11 July 2013 – Scrappage schemes in Europe failed to help economic recovery and did not provide a boost to sales in the majority of markets, according to a new report by Verdict. Following analysis of current and historical data, trends have shown that scrappage schemes in France, Italy and the UK comprehensively failed to increase new vehicle sales, and in the case of France and Italy, in fact exacerbated the issue of overcapacity in these markets.
The new report, Overcapacity in the European Light Vehicle Market, reveals some damning evidence of the success of scrappage schemes in Europe, showing an almost universal failure of these schemes to stimulate new vehicle sales growth. Of the schemes in the UK, Spain, Germany, Italy in France, only the German scheme showed any tangible long-term benefit, with 9.5% new growth in the year following the scheme’s conclusion.
This is examined in the context of overcapacity in the European light vehicle market, with scrappage schemes only one of the proposed solutions to what is now known to be a Europe-wide problem. Government intervention has so far failed to stimulate growth, with many major manufacturers now looking to restructure in order to alleviate the issue.
“Restructuring appears to be the best option for many major volume players in the European market,” says Richard Brown, a senior analyst with Verdict. “With companies such as Peugeot-Citroen and Opel so heavily invested in this segment, they will need to cut back on production if they hope to reverse their fortunes in markets such as France and Italy.”
While restructuring is the clearest option for many of these companies, other ways of reducing capacity have been explored. Peugeot-Citroen has been looking to shift some of their models to a more upmarket segment, while Opel have recently announced they will enact a similar policy. With compact SUVs and luxury vehicles still selling well in spite of the recession, this should be a sensible move for these companies.
Furthermore, these companies will need to react well to the future dynamics of the European vehicle parc following recent trends in new s. The problem of overcapacity is expected to persist for the foreseeable future, meaning that the number of older vehicles in the European parc is likely to grow as austere motorists refrain from purchasing new vehicles.
“Low levels of new s not only impacts vehicle manufacturers’ profits, but also shapes the future needs of the customer in the aftermarket”, says Charlie Schouten, an analyst with Verdict’s automotive team. “Since the number of older vehicles in the aftermarket is on the rise in mature markets, we can expect dealerships to begin to lose out on volume, with garages that typically offer cheaper vehicle servicing gaining market share at their expense.”
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