Paris car show: Russia, Brazil markets slamming on the brakes

GMT 23:24 2014 Thursday ,02 October

Arab Today, arab today Paris car show: Russia, Brazil markets slamming on the brakes

Paris car show
Paris - AFP

Once seen as the promised land for major car sales, emerging markets such as Russia and Brazil have hit the skids in recent months, analysts said as the Paris motor show opened Thursday.
While the glitz and glamour of the latest car technology and showy legends like the Ford Mustang drew the crowds, some manufacturers were fretting about the collapse of emerging markets seen until recently as an El Dorado compared to a saturated and depressed European market.
The situation in Russia, hit hard by sanctions over the Ukraine crisis, sparked particular concerns.
Sales of new cars in Russia have tanked, down 25.8 percent in August after 22.9 percent in July and several Western brands have seen production slide dramatically.
Renault-Nissan, which recently took control of the main Russian manufacturer Avtovaz, has suffered a fall of nearly one third in its Lada sales.
Europe's biggest carmaker Volkswagen was forced to freeze its production of Skodas in September, and Opel has cut one third of staff at its St Petersburg factory.
Ford Europe boss Stephen Odell said they had slashed staff numbers by 1,500 since January.
"The situation in Russia has deteriorated beyond our projections. But the Russian market, at its current rate, is still equivalent to the British market" in terms of volume, said Odell.
Nevertheless, he warned: "Most observers were predicting a Russian sector of more than three million units, maybe 3.3 million and in fact, it will be around a million units less."
European car manufacturers flocked to Russia as a source of fast expansion -- meaning that after several years of spectacular growth, it was the second biggest car market in Europe after Germany.
- 'Extremely difficult context' -
Experts pointed to a similar situation in Latin America -- but for different reasons.
In Brazil, seen as a promising market for major car brands given a rapidly rising middle class, an economic downturn has resulted in a crash in new car sales.
In the first half of the year, sales were down 7.6 percent and exports down a full 35 percent, forcing big players like Fiat, Ford and General Motors to put staff on temporary leave.
"New car registration will drop 10 percent this year. It's an extremely difficult context" in Brazil, noted Yann Lacroix, an automotive expert at Euler Hermes.
The situation is worse in neighbouring Argentina, whose car market is expected to decline by a whopping 30 percent this year in the midst of a crippling downturn.
However, some experts put the recent fluctuations down to volatility expected in immature markets.
Whether in Russia or Brazil, "we think that these countries have growth potential that will remain intact," said Francois Jaumain from the consultancy Price Waterhouse Coopers.
Renault-Nissan boss Carlos Ghosn was similarly bullish on his native Brazil.
"I have no doubt that growth in the Brazilian market will take off because fundamentally, Brazil is far below its potential," said Ghosn.
Nevertheless, he did acknowledge in an interview on French television that "Brazil and Russia are in difficulty", while China remains the biggest growth market with a predicted 7.5 percent growth in 2014.
Meanwhile, the home market for many of these manufacturers -- Europe -- might be staging a gradual comeback after several years of pain.
"Europe is restarting. It's slow and it's not very, very significant. We're talking about three or four percent growth in 2014," said Ghosn.
However, he hailed this as "good news because this market hasn't stopped falling since 2007. We have had five years of decline and we are between 20 and 23 percent below the 2007 level."
The Paris motor show opened Thursday to industry professionals and will throw open its door to the wider public on Saturday.
A total of 71 constructors will be showcasing the best they have to offer, with 260 brands on display over an eye-popping 125,000 square metres of exhibition space.
Organisers hope to attract one million people before it closes on October 19.


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