Car Industry Expects Weakness – Corolla Financial Report

Barcelona (I-Newswire) September 28, 2011 - The Frankfurt Motor Show brought together the world's leading car manufacturers this month to show off futuristic concept vehicles against a backdrop of concern for the health of the industry. Car sales so far this year have been strong and have helped breathe new life into the market; however, the future does not appear as rosy. The growth of car sales in China is now slowing, having expanded around 30 per cent during the 2010/11 financial year. Only a rate of 10-12 per cent is expected this year. Despite this, sales in the China market are still in a growth phase. Economic problems in Europe have caused analysts to show little hope for EU prospects. The US is where car and light truck manufacturers have hoped for a big rebound. It is only five years ago that the domestic market produced over 16 million sales annually. The US car market will get more cutthroat than usual as sales drop and the returns of Toyota and Honda are complete. GM, Ford, and Chrysler are likely to lose some market share to the Japanese then, as they already have to newer rivals, particularly Hyundai and Kia.

Economic weakness and record debt levels in Europe and the US are also causing concerns. The US and European markets are also expected to be soft in the months ahead, though as of yet there is no talk of another recession. The auto industry, particularly manufacturers with a large portion of their sales in the US, is about to go through another recession of its own. Record levels of debt in Europe and the USA are sparking concern, and growth in these markets is expected to be slow at best. Even the currently successful German car makers (BMW, Mercedes, Audi) will be concerned at these problems creeping over the horizon. It is too early to decide whether the biggest auto firms will start to lose money again, but they will at the very least struggle to show profits. Consequently, the current models unveiled at the show were both smaller and more fuel efficient than the cars they were making before the downturn. Harmful emission levels have also been cut, with most carmakers now offering electric or petrol-electric hybrid alternatives to cars powered by conventional petrol engines. Many of the new models displayed at the show reflected current concerns such as fuel prices and environmental impact with electric hybrid cars, small sports utility vehicles taking up a large portion of the stands at the show.

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