An equities analyst told just-auto today that the West European car market is heading for a 13% downward correction in 2010 as scrappage incentives are removed.

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Sabine Blümel, an analyst with Creative Global Investments (LLC), said that government incentives and OEMs’ discounts have changed the shape of the recession in the West European car market.


Currently there are government incentive schemes in nine West European countries, accounting for about 85% of the market. In addition OEMs have offered generous discounts on top of publicly funded incentives. 


“The resulting substantial cut in transaction prices are expected to boost 2009 sales by 1.4m, only 400,000 units of which should be demand brought forward,” Blümel said.


According to Blümel’s analysis, a  shallow decline of  -5.9% to 12.76m car sales this year in Western Europe is set to be followed by a 12.8% correction to 11.13m units in 2010.

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“Without incentives, the car market would be heading towards 11m units in 2009, implying a decline of around 18%; this would be followed by a very moderate recovery to 11.5m in 2010,” she maintains.


Germany’s car market, in particular, has seen spectacular scrappage-led growth this year, notching up a 40% year-on-year gain in May, prompting one analyst to describe the market as ‘on steroids’.


Blümel expects the the German market to increase by 24% to 3.83m units in 2009, a 10-year high.


However, in 2010 she expects to see a 30% correction to less than 2.7m units. This is in sharp contrast with IMF’s macro-forecast of GDP contracting 5.6% in 2009F and 1.0% in 2009, Blümel points out.


“The current recession in the West European car market is expected to have a depth of 3.67m units or 25% and to take seven years before reaching pre-recession levels,” she says.


Blümel’s comments echo those of Carlos Ghosn who said this week that Europe’s recovery will come in 2011 and that car makers in Europe will struggle without incentives.


Dave Leggett


See also: BELGIUM: European recovery will come in 2011 – Ghosn