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Italy Autos Report Q3 2010
Business Monitor International, June 2010, Pages: 50
Business Monitor International's Italy Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's automotive industry.
Just how far the vehicle scrappage scheme in 2009 had gone towards fuelling demand for passenger cars in Italy last year is evident from the trends in vehicle registration during the first four months of 2010. After double-digit growth in Q110, passenger car sales fell sharply year-on-year (y-o-y) in April, indicating that the combined growth of 13.5% y-o-y between January and April this year was largely due to the low base effect from Q109 sales.
What has further dampened vehicle demand is the uncertainty around the extension of the scrappage scheme this year, which could be causing potential customers to postpone purchases until a final decision is made. If the scheme is not extended, BMI expects sales to be restricted at 2.27mn units this year, down at least 3% y-o-y. High vehicle ownership in Italy will mean that sales over the rest of the forecast period to 2014 will be contained at an average 3.5% y-o-y (at the very best) and reach just over 2.62mn by the end of 2014.
We expect Fiat to continue to dominate the industry, helped by consumer loyalty towards domestic brands. Although foreign carmakers are increasing their presence in Italy, BMI believes that the real challenge for Fiat will be to internally restructure its operations, while also economise that of Chrysler’s abroad. The Italian carmaker will separate its automotive and components divisions from its agricultural and truck-making divisions. Such restructuring will mean harsh cost cutting and reduction in excess capacities, the latter of which will severely impact Italy’s auto production.
BMI is currently forecasting a near 1.5% y-o-y fall in auto production this year, which we expect will be followed by a relatively stronger 2% rebound in 2010. In the long run, however, rationalisation of costs is likely to tempt reduction in capacities in the longer term, taking total production to 914,000 units by the end of 2014.
A poor record of on raising productivity, coupled with widespread corruption, an inefficient labour market and the mature nature of its auto market, have resulted in a fall in Italy’s score in BMI’s Business Environment rankings for the European auto industry this quarter. Although Italy has outshone Russia, BMI warns its position may be threatened by any rebound in the Russian economy and subsequent rise in production.
The Italian economy slipped back into negative growth during Q409, after previously showing signs of stabilisation. We still expect a return to positive growth in 2010, though we warn that weak domestic and external demand will allow for a fairly modest rate of economic expansion. We also warn that a weaker than expected recovery in eurozone demand, coupled with a move towards fiscal consolidation and monetary tightening in the eurozone, pose significant risks to our medium-term forecasts.
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