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Viewing report
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Italy Autos Report Q4 2011
Business Monitor International, Sep 2011, Pages: 56
Unimpressive growth in incomes, a tough domestic environment and the uncertainty over the eurozone debt crisis continue to discourage new vehicle sales in Italy. Estimates from the Italian Association of the Automotive Industry (Anfia) indicate that the passenger car market fell 12% y-o-y in the first eight months of this year, to 1.22mn units, while commercial vehicle sales grew a modest 1% y-o-y in H111.
While we expect this divergence to continue, we have downgraded our 2011 forecast to a 6.4% y-o-y fall in sales.
There is similar gloom in the production segment where weaknesses in the domestic and overseas European markets took Italy’s H111 autos production down 7.3% y-o-y, to 2915,413 units. Given that we increasingly see signs of a cooling down in vehicle demand in Germany and France, we do not see any room for improvement in Italy’s vehicle production during the remainder of the year. As such, we reverse our forecast from a 2.5% growth expected earlier to a 4.5% contraction by year-end. If any, favourable base effects could pose some upside risks to this forecast.
Uncertainties in domestic vehicle sales and the shaky future for autos production in Italy mean it is ninth in BMI’s Risk-Reward Ratings for the autos industry in Europe. Italy now ranks way behind its other Western European peers UK, Germany and France and scores poorer than the leading emerging European markets of Russia, the Czech Republic, Poland and Turkey. While stronger economic growth will partly help improve its score, we see little scope for Italy moving up the ratings unless it improves its production competitiveness and corrects the widespread corruption and its inefficient labour market.
With such an operating environment, it is unsurprising that domestic players are keen on expanding overseas. Fiat has long warned of sliming its domestic operations as it seeks for cheaper production bases in Poland and Serbia and looks to offset sales loses in the domestic market by expanding overseas.
Similarly, in August 2011, Italian bike maker MV Agusta entered into a highly strategic partnership deal with Brazilian firm Dafra Motors as a part of its strategy to reduce exposure to the domestic market. Agusta has already sealed distribution agreements with local players in Australia and Canada and is also eyeing the Chinese market. To that, it has partnered with China-based Lifan Industry Group, which will introduce Agusta bikes, engine technology and parts to the market.
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