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Viewing report
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Greece Autos Report Q4 2011
Business Monitor International, Sep 2011, Pages: 38
The autos industry in Greece continues to reel from the precarious state of the Greek economy. New car sales during the first seven months of this year have showing no signs of rebounding, falling over 40% year-on-year (y-o-y), to 110,070 units, according to estimates from the country's autos association AMVIR.
The performance is highly discouraging given that it comes despite of the introduction of a car scrappage scheme by the government in February this year and highlights the severity of fiscal consolidation and the lack of household and business demand. We have accordingly downgraded our already pessimistic outlook of a 6% y-o-y drop in car sales to a 25% y-o-y fall this year. However, we maintain our hopes that 2012 will be a slightly more positive year, mainly on the back of favourable base effects.
Meanwhile, the Greek economy contracted a hefty 4.8% in the first quarter of 2011 compared with the same period a year earlier, prompting BMI to expect the depression to continue throughout the year. Aside from the actual stock of outstanding debt, the main issues confronting Greek economy are the overwhelming structural economic deficiencies and the unorthodox policy prescription handed down by its creditors.
As such, though the rate of decline has slowed somewhat from the 7.4% plunge of the previous quarter, we expect the depression to continue throughout the year. Indeed, by the time the economy tentatively returns to positive growth by 2012, Greece is set to have endured three years of depression.
This lacklustre performance combined with the lack of domestic auto automotive manufacturing will mean that Greece will continue to be a significant underperformer in Europe. Placed at the bottom in BMI’s Risk/Reward Ratings for the auto industry in Europe, Greece not only suffers from poor scores in the auto market, but also in terms of its country risk score.
There are, however, opportunities for Greece to improve this score if the government repealed some the regulations on the industry, thereby speeding up recovery in the market. The government, however, will be reluctant to carry out such measures because of the high levels of air pollution in the country’s urban areas. An environment tax was introduced by the Socialist government for 2010, resulting in annual road tax of between 25% and 75%, depending on the age of the vehicle and the size of its engine. BMI research shows that the policy favours new car owners, who are likely to face a fall in their road tax by 4- 39% compared with 2009 levels. Meanwhile, taxes for older vehicles and those with bigger engines could see as much as 75% increase in their taxes in 2010.
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