Abstract
The French automotive industry continues to position itself as one of the
strongest markets in the Europe
alongside the region’s biggest
player, Germany. As BMI examines in its Q3 France Autos Report, the
market’s performance is being underpinned by the government’s
supportive measures for carmakers and
parts suppliers.
Domestically,
autos production has gained from the government aid, directly and indirectly.
Following
the introduction of a scrappage scheme last year, vehicle sales
have reportedly stabilised, falling by only
4.8% year-on-year (y-o-y) to
689,931 units in 4M09 and outperforming the Europe-wide average
contraction of 15.9%.
The presence of a large number of parts suppliers
has helped to make France an integrated base for autos
production.
However, suppliers and carmakers have been struggling for money due to the
ongoing global
liquidity crisis and a consequent fall in orders. The
government came to the rescue, firstly using
EUR18.5mn from its strategic
investment fund (FSI) to buy a 2.35 % stake in Valeo, while it has also
announced its intention to use some funds from the FSI to invest a nearly
EUR10mn in niche car and
equipment maker Heuliez. However, the market
suffered when German partmaker Continental
announced plans to close two
high-cost production plants in Europe, one of which is in Clairoix,
France,
by March 31 2010.
In March, Renault made an attempt to reverse
the trend with a shift in the production of its Clio Campus
from Slovenia
to France. The move follows government aid provided to the carmaker last year.
Despite
these positive developments, BMI maintains caution, given our
expected -2.4% growth in real GDP this
year. While we maintain our sales
forecast of a 5% y-o-y fall by end-2009, we have revised down our
production forecast to a fall of over 12%. The latter is based on increased
exports from France to
emerging markets which have themselves suffered the
effects of the downturn.
Renault and PSA Peugeot Citroën have a
reputation of making strong inroads into environmentally
friendly vehicle
technology which leaves little room for others to compete. This, along with
high car
ownership levels in the country, reflects limits to potential
returns on new investments in the France. This
places France in ninth
position in BMI’s Business Environment Ratings for the autos industry in
Europe.
Its strong position, relative to the other markets, could help it
move up the ladder in the medium term.
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