China clouds European optimism as IAA auto show opens

GMT 19:10 2015 Tuesday ,15 September

Arab Today, arab today China clouds European optimism as IAA auto show opens

A Ferrari California T car
Frankfurt - AFP

Leading carmakers boasted at the IAA auto show in Frankfurt on Tuesday about resurgent sales in Europe but said they were keeping a close eye on slowing demand in China.

The organisers, the German carmakers' association VDA, said the IAA's 66th edition promises 210 world premieres and an "amazing display of innovations" from 1,100 exhibitors from 39 countries.

The world press got a sneak preview on Tuesday and then industry professionals will have the grounds to themselves for two days before it opens to the public on Saturday.

After long years of crisis, the automobile industry finally has something to smile about as demand picks up "significantly" in Europe, said Toyota vice president Didier Leroy.

The summer was particularly good for the region, where sales rose by 9.5 percent in July and 11.2 percent in August, driven primarily by strong demand in Spain, Italy, France, Britain and Germany, according to data published by the European Automobile Manufacturers' Association ACEA.

- Europe in good shape -
The European market "is in better shape than expected," said Carlos Tavares, head of PSA Peugeot Citroen, even if "we're still a long way from the levels seen before 2007".

The sector had annual sales in Europe of 16 million units prior to the 2008-13 crisis that cut the market by around a quarter.

"Even if we're starting from very low levels, it's still encouraging to see a recovery," said Stefan Bratzel, director of the Center for Automotive Research CAM.

"The drop in sales between 2008 and 2013 seems to be over," said auto analysts at Observatoire Cetelem, forecasting growth of six percent for this year.

Opel, the perennially loss-making subsidiary of US giant General Motors, said it hoped to gain market share and reach break-even in 2016, said its chief Karl-Thomas Neumann.

But it is not just Europe: the sector's new-found health is evident in North America, too, with demand near record highs.

- China headache -
By contrast, emerging economies such as Brazil and Russia are mired in recession.

China, where years of double-digit growth created the world's biggest auto market, has been hit with a brutal economic slowdown, and demand growth is projected at just three percent this year.

"Growth in China has slowed, without doubt. There is no longer double-digit growth. But I believe demand for mobility will remain very strong," the head of German auto giant Volkswagen, Martin Winterkorn, said late on Monday.

"It's normal that during periods of growth... there are one-off slowdowns," said PSA's Tavares. "There is no need to panic."

"We knew it couldn't go on for ever. It was clear that we wouldn't always see high double-digit growth," said Friedrich Eichiner, chief financial officer at BMW.

The main issue now was how long the period of consolidation would last, Eichiner said.

- New models -
"We believe that China will continue to develop positively in the long term."

Industry experts point out that the market penetration is still very low in China, so demand is likely to continue to grow in the medium term, even if at a less profitable rate for foreign makers.

Renault, too, was optimistic about the prospects for the Chinese market.

"It is absolutely not a matter of concern. On the contrary, it's grounds for optimism, as there are plenty of opportunities for Renault, even if the market is not growing as fast as expected," chief executive Carlos Ghosn told AFP in an interview.

Among the new models on display at this year's IAA, Renault's Megane 4 and Opel's Astra 5 will both be vying for attention. The French carmaker will unveil a new version of its Talisman, while German top-of-the-range maker Audi will present the next generation of its A4.

But it will be the urban 4x4s, the market's darlings, that are likely to steal consumers' hearts, with Volkswagen and Ford presenting more affordable models such as the Tiguan and the Edge, while Jaguar will show off its luxury F-Pace and Bentley its ultra-exclusive Bentayga.

For those opposed to the fuel-guzzlers, there are more ecologically-minded models -- particularly interesting for drivers in Europe, which already has the most stringent transport CO2 emission goals in the world and could see them tightened at the COP21 summit in Paris in December.

Toyota has chosen Frankfurt to lift the veil on the fourth generation of its flagship hybrid, Prius. BMW will also present a series combining both electric and petrol engines.

Another key focus at this year's IAA will be exciting new technologies such as automated driving.

For the first time, around 30,000 square metres (323,000 square feet) of exhibition floor space will be given over to new forms of mobility, from the connected to the self-driving car.


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