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Italy Autos Report Q1 2011
Business Monitor International, Jan 2011, Pages: 49
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.
A 1.1% year-on-year (y-o-y) growth in Italy’s real GDP during the second quarter of 2010 confirms that economic recovery is underway. However, we stress that domestic demand remains weak, with a number of risks to the recovery such as the government's fiscal consolidation programme, political instability in light of possible early elections, and still subdued demand elsewhere in the eurozone.
Striking evidence of this can be seen in a more than 7% y-o-y decline in the country’s new vehicle sales, to just over 2mn units, during 10M10, putting BMI’s forecast of end of year sales reaching 2.23mn units firmly on the cards. In 2011, we expect a continued slackness in the passenger cars segment to act as dampener on overall new vehicles sales recovery, taking the market down a further 2% y-o-y, to 2.18mn units. We see some recovery from 2012, but it is likely to remain modest at the very best as unemployment is likely to remain elevated over the medium term. As such, a complete recovery in market demand may not be possible any time during the forecast period as sales should be limited to only 2.45mn units by 2015, nowhere near the 2.79mn units sold in 2007.
Production too has failed to post any positive growth from H210; increasing the risk that overall production could end 2010 on a negligible 0.5% y-o-y growth at the very best. We expect this to be followed by a relatively stronger 2.5% rebound in 2011, most of which is likely to be a result of Fiat increasingly gearing production to export markets. Meanwhile, spending cuts and the consequent slowdown in economic activity in Europe will mean that a strong recovery in Italy’s production is kept subdued. Total production will reach 981,007 units by the end of 2015 as the carmaker improves capacity utilisation, but still operating far below the pre-crisis level of 1.28mn units in 2007.
Fiat, however, has given a final push to secure a future for autos production in Italy by revealing plans to establish a EUR1bn joint venture with its US partner Chrysler to take over its Mirafiori plant in Turin. The two partners will build Alfa Romeo and Jeep models at the plant, as much as half of which will be sold in Europe, while the other half will be exported, mainly to North America. To some extent, this will allay Italy's fears that Fiat's drive to increase presence in the North American market will come at the expense of lower production at home.
However, long term growth for Italian carmakers and companies is likely to come from emerging markets. Tyre maker Pirelli has plans to spend EUR1.9bn on premium products and its emerging markets business in the next five years to enhance its margins. Furthermore, the supplier is aiming to grow its presence in Asia Pacific, consolidate in Latin America and seek new opportunities in mature markets. While such strategies make sense for Italian companies, it increases the threat that the country may not be able to return to pre-crisis any time during the forecast period. In turn, these tendencies risk Italy’s fourth position in BMI’s Risk/Reward Ratings for the auto industry in Europe, which increasingly looks shaky as recovery gathers pace for its closest rival Russia.'
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