Europe’s Car Makers Cut Sales Forecast; Seek Government Help, Electric Charging Subsidy

European carmakers expect sales in the European Union (EU) to slip 1% this year after previously expecting a return to growth. They want unspecified government help to help spur economic growth and grease the move towards electric cars with more subsidies for the charging infrastructure.

ACEA, the European carmakers association known by its French acronym, joined the echo chamber forecasting sales weakness in Europe in 2022, but didn’t attempt to predict 2023. Prospects for sales of cars and SUVs are looking increasingly weak.

Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) in Duisberg, Germany, puts the outlook this way.

“The risk of Europe falling into recession is high. The Ukraine war and the associated increases in energy prices have hit industry and sent the economy into a downward spiral. Fighting inflation is the big challenge for most central banks and will increase significantly. There are few arguments for investors to encourage buying auto stocks,” Dudenhoeffer said.

The same can be said for consumers. Anyone thinking of buying a new car, might well just wait another year before replacing the old one.

ACEA President and CEO of BMW Oliver Zipse didn’t say what government help he wanted, or how much should be spent on electric charging.

“To ensure a return to growth – with an even greater share of electric vehicle sales so climate targets can be met – we urgently need the right framework conditions to be put in place,” said ACEA President Zipse, during an ACEA reception Thursday.

“These include greater resilience in Europe’s supply chains, an EU Critical Raw Materials Act that ensures strategic access to the raw materials needed for e-mobility, and an accelerated roll-out of charging infrastructure,” Zipse said.

ACEA has cut its EU sales forecast and now expects a 1% fall to 9.6 million for the year. Thanks to the challenges of Brexit, the coronavirus pandemic, semiconductor supply bottlenecks and the war in Ukraine, EU sales have dropped 26% since 2019.

LMC Automotive’s forecast for Western Europe, which includes the 4 biggest EU markets Germany, France, Italy and Spain, plus EU outlier Britain, has been deteriorating since earlier in the year when it expected a healthy 8.6% sales gain. The Russian invasion of Ukraine destroyed that. Its latest forecast of a 5.9% fall for the year to 9.96 million vehicles is a slight improvement on last month’s expected decline of 6.2%.

LMC Automotive didn’t attempt a specific forecast for 2023, but it points to hard times for the industry.

“Although supply constraints are still dictating the pace of vehicle sales, demand is also being eroded by low consumer confidence, high inflation, rising energy prices and contractionary monetary policy. For 2023, while we expect supply‐side disruptions to ease, there is a greater likelihood that falling demand will supersede supply factors as the main barrier to sales,” LMC said in a report.

Bernstein Research said order backlogs are falling in Europe, and upcoming 3^rd quarter financial results will flatter to deceive.

These results will likely be the last positive ones for a while. They will be inflated by unprecedented conditions. The chip shortage crimped big overall sales targets and meant most carmakers had to switch to selling fewer vehicles but made sure they were mainly high-margin vehicles.

Bernstein Research sees a good chance that big European manufacturers will escape power-related shutdowns, but it worries there will be problems for them in 2023.

“EU sector EBIT (earnings before interest and tax) likely lower by 20% to 30% in our estimates,” Bernstein Research said.

CAR’s Dudenhoeffer said German sales in 2022 will fall to around 2.5 million, the worst for 30 years, with no recovery in sight until 2024.

“The good times of the windfall profits of the last 2 years will be over,” Dudenhoeffer said.