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France Autos Report Q1 2012
Business Monitor International, Dec 2011, Pages: 90
Business Monitor International's France Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on France's automotive industry.
Cumulative new passenger car sales in France just about managed to remain in positive growth territory during the first ten months of 2011, growing 0.4% on a year-on-year (y-o-y) basis to 1.84mn units. BMI attributes the growth to the early gains made in the beginning of the year when consumers took delivery of vehicles ordered under the 2010 vehicle scrappage scheme.
In the commercial vehicles segment, total sales grew a modest 5.2% y-o-y to 350,921 units during 9M11, slowing significantly from the 8.5% y-o-y growth registered in H111. We see little scope for significant growth during Q4 as a combination of the high base from Q410 sales and the looming slowdown in the domestic economy will hurt demand. In line with our core view of a softer expansion heading into 2012, we limit our vehicle sales growth forecast to 2.2% y-o-y growth after an expected 3.4% decline in 2011. We expect conditions to be tight for both carmakers and suppliers.
Both PSA Peugeot Citroen and Renault are likely to suffer from their excessive reliance on the European market, which we expect to be a significant underperformer in the global autos market. Suppliers are already feeling the pinch of higher raw material prices and the prospect of unsold inventories, which will put further pressure on their weak financials. France's Michelin has already indicated that it could put the brakes on its production and expansion plans if global economic conditions continue to deteriorate.
All of this gives French carmakers and suppliers every reason to seek growth in high-potential emerging markets. Inergy Automotive Systems, a wholly owned subsidiary of France's Plastic Omnium, accordingly entered into a joint venture with Russia-based Detalstroykonstruktsiya in October 2011. Opportunities for industry participants also lie in the potential for alternative-fuel vehicles, as the government seeks to boost public confidence in these vehicles. In October 2011, local news sources reported that the French government is looking to acquire a massive fleet of some 15,000 EVs from Renault and 3,900 from PSA Peugeot Citroen.
A downside risk for French carmakers, however, comes from the degree of influence the government exercises over their production strategies. In August 2011, Renault revealed its plans to delay the start of production at a car battery plant in Flins for two years, owing to some complex financial arrangements, perhaps arising from the French Strategic Investment Fund's decision to withdraw from a planned EUR125mn (US$175.5mn) investment in the project. Given that vehicle electrification forms the core of much of Renault's future growth strategy, BMI believes that the delay will weaken investors' confidence in the company as well as Renault's own growth plans.
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