New Market Report: France Autos Report Q2 2010

March 16, 2010 - PRLog -- France's earlier-than-expected exit from the recession in Q209 and the fact that private consumption has stayed positive throughout the downturn, makes BMI believe that overall domestic demand will be quick to pick up in 2010. Although we do not rule out slackened demand as a post-scrappage scheme phenomenon, we hold a fairly moderate forecast of a 6% year-on-year (y-o-y) fall in vehicle sales in 2010 compared with a considerable 20% y-o-y expected in Germany. Estimates from the Comité des Constructeurs Français d'Automobiles (CCFA) indicate that the scrappage scheme has helped new passenger cars sales rise nearly 4.4% y-o-y, to 1.82mn units in 10M09. With the extension of funding towards the scheme to a total EUR500mn, Patrick Devedjian, the senior cabinet minister in charge of the Implementation of the Recovery Plan - a specialist post created after the global financial crisis - expects the scheme to support as many as 500,000 cars by the end of 2009. In contrast, sales in the commercial vehicle segments declined 23.0% y-o-y and 38% y-o-y respectively for light and heavy vehicles in the 10-month period, which is likely to take the total end-2009 sales down 5% y-o-y, to 2.43mn units. France suffered a more serious downturn in terms of production, however. Both domestic leaders - Renault and the country's biggest carmaker PSA Peugeot Citroën - reduced car output 44.9% y-o-y and 32.3% y-o-y respectively during 7M09. These declines came despite commitments sought by the government in early-2009. BMI believes that fears of production erosion and late recovery in export markets will make recovery in production very painful. As such, we have revised down our production forecast to a more than 39% y-o-y drop, to 1.3mnm, by end-2009 which will be followed by further declines until the end of our forecast period to 2014. Having survived the crisis, the next challenge for carmakers in Europe will be to develop environmentally friendly technologies which comply with EU's directives by 2015. In agreement with BMI's concern about the need for relevant infrastructure development, the French government has allocated funds of EUR1.5bn (US$2.2bn) to encourage two million new electric and hybrid (HEV) cars on roads nationwide by 2020. Parts supplier Valeo has received EUR6mn (US$8.3mn) from the French Agency for Environment and Energy Management (ADEME), towards two research projects aimed at developing of low carbon emitting vehicles. Both programmes testify BMI's view that a successful launch of electric vehicle (EV) programmes nationwide will require co-ordinated action between carmakers and suppliers as well as active government involvement. Meanwhile, Renault's aggressive move towards electric vehicles worldwide has set precedents for most of its counterparts to follow.

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