Abstract
Although almost all markets across Europe have been hit by the ongoing crisis,
the French government
has been by far been the most supportive in terms of
providing aid to its domestic autos industry. As
examined in this, BMI' s
latest France Autos Report, these measures have placed France in a
slightly
better-off position than its other European counterparts,
especially the UK, Italy and Spain.
According to estimates from the
manufacturers' association, the Comité des Constructeurs Français
d' Automobiles (CCFA), vehicle production in France declined by a staggering
29.3% year-on-year (y-oy)
to approximately 2.13mn at end-2008. The fall
mainly came on the back of cost-saving reduced
production by domestic
manufacturers, a trend which BMI expects to continue as long as consumer
demand remains low. With BMI' s economic analysis expecting growth of -2.4%
y-o-y in 2009, followed
by a small recovery of 0.2% y-o-y growth in 2010,
we do not see any substantial increase in production in
those periods. In
fact, we warn that French autos production could continue to be eroded by
companies
moving operations to cheaper Eastern European bases, although
the government' s five-year loan to
carmakers, and their consequent
commitments to the country, will ensure that the fall in output is not too
drastic. Nevertheless, production is likely to be concentrated on small cars
and to be limited to 1.90mn
units by the end of our forecast period in
2013.
From the point of view of demand, BMI maintains its forecast of a
fall in sales despite scrappage
incentives announced by the government in
December. We expect domestic and export demand to be low,
falling by more
than 5% and 2% y-o-y, respectively, in 2009. In line with this, Renault SA
CEO, Patrick
Pelata, revealed that the company will revise its
distribution strategy to the ' build-to-order' technique
instead of
' build-to-stock ' . This is to avoid accumulation of ageing vehicles at its
plant. Another
domestic manufacturer, PSA Peugeot Citroën , also revealed
its plans to reduce production of its 1007
model by nearly one-third at
its plant in Poissy. On top of this, it will cut 1,000 jobs in France this
year in
line with its CAP 2010 plan.
French carmakers have earned
themselves a reputation for developing more environmentally-friendly
vehicles, which has helped them increase sales, albeit not significantly.
Renault sold 449,334 units, up
marginally by 0.6% y-o-y, while PSA sales
were up by 1% over 2007 levels. The market has emerged as
the strongest in
Europe during the downturn, but weaknesses in its country structure mean that
it
maintains its score of 55.1points (out of a possible of 100) in BMI' s
Business Environment Ratings for
the quarter.
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