Abstract
Following the success of the scrappage scheme in France and the significant gains made by the market
players therein, there is little surprise that the market has begun getting wary about the sustainability of
this demand when the scheme comes to an end. As BMI examines in its Q409 France Autos Report, the
government is therefore considering gradual withdrawal of the incentive by stopping vehicle orders
(under the scheme) by the end of this year, although the project officially comes to an end in the
beginning of next year.
According to estimates from Comite des Constructeurs Francais d' Automobiles (CCFA), the scrappage
scheme helped passenger car sales in France reach 1.319mn units in 7M09, up marginally by 0.6% yearon-
year (y-o-y). However, trends in the commercial vehicle segment continued to follow the overall
gloom in economic activity, resulting in a staggering 33.6% y-o-y, to 24,270 units in 7M09. BMI
forecasts the end of year vehicle sales to reach 2.53mn units, down from 2.57mn units sold in 2008.
However, for 2010, we have significantly lowered our sales forecast to a nearly 8% y-o-y drop in vehicle
sales, to 2.3mn units, mainly as a result of the end of the scrappage scheme which had otherwise inflated
demand during the peak of this crisis in 2009.
Meanwhile, for production, we expect carmakers to limit 2009 output to 1.78mn units, down from BMI's
last forecast of 1.86mn units by end-2009. Weak export demand has already prompted the French
carmakers to produce 40% fewer vehicles, to 789,265 units in H109, compared with the same period last
year. However, in 2010, carmakers could in fact slightly increase production in tandem with the overall
recovery in other global markets. Nevertheless, weak domestic demand will beat most of the optimism in
the market meaning that total production will increase only by a marginal 0.9% y-o-y by 2010.
In terms of the competitive landscape, French carmakers continue to dominate the new vehicle market in
France and their position was further solidified by the increased demand this year. By end-7M09, the
PSA Peugeot Citroen group held a solid 32.8% share of the market while the Renault group (including
Automobile Dacia) occupied close to 25%. The results reaffirm BMI' s view that the two dominating
brands create little scope for foreign carmakers to garner market share. The same is also reflected in our
Business Environment Rankings for the autos industry in Europe where France occupies ninth position,
losing points on low limits of potential returns on new investments.
Although French carmakers themselves have not been directly affected by the ongoing mergers and
acquisitions in the European automotive industry, the developments could significantly influence the
future decision-making of the French carmakers. But for now, Renault's aggressive move towards electric
vehicles worldwide has set precedents for most of its counterparts to follow.
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