Overcapacity In Europe: It's Worse Than We Thought

Derek Kreindler
by Derek Kreindler

A report by Alix Partners, an automotive consulting firm, spells out what we at TTAC have been saying for some time; Europe’s auto industry is facing a major crisis of overcapacity, but no steps have been taken to remedy the matter.

the consulting firm estimates that there are 26 million units of excess capacity, or the equivalent of 40 assembly plants.

To make matters worse, only three plants have been closed in the last four years, while new facilities in Russia other Eastern European companies have popped up. In that same time-frame, American automakers closed 18 factories as they underwent their own crisis.

Europe’s market has shifted drastically in the last two decades; low-cost cars have gone from being the smallest market segment to the largest, while gains in the premium sector have also helped put a squeeze on the middle from the other side. Of the 10 major automakers in Europe, the 5 who are operating below 75 percent capacity (which ensures profitability) are all mainstream automakers. The other 5 who are operating over that threshold all have strong premium brands, whose wares are being snapped up by eager customers all over the world.

Derek Kreindler
Derek Kreindler

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  • El scotto El scotto on Jun 29, 2012

    Uh, the European Union is cratering? Nervous people don't go out and buy shiny new cars.My apologies to our European readers, ex-pats, etc. Cars are marketed globally these days; if you're not selling in the US, expect to die.

  • Chicagoland Chicagoland on Jun 29, 2012

    Sounds like a few years ago here. People will say 'dont cut jobs/plants/etc', but then they say 'Oh I never buy new cars, too much $'.

  • NMGOM NMGOM on Jun 29, 2012

    I wonder what this overcapacity in Europe (and its sales consequences) is going to do the Volkswagen's pledge to be the worlds' #1 car maker by 2018? And if the BMW/Toyota collaboration goes even further into formal partnership, how will that affect who is going to be #1? Neither one of those car manufacturers seems to be struggling at the moment. Any thoughts? ----------------

    • See 2 previous
    • Dimwit Dimwit on Jun 30, 2012

      The biggest problem with everything is politics. It's rather obvious that countries with (healthy) auto manufacturing do much better than countries that haven't any. That means France, Spain and Italy will fight to the death to keep their native plants running as much as possible and hope someone else folds first. It's all a very high stakes poker game. Only Germany can afford to lose a little and that means Opel is toast if someone can convince GM to pull the trigger.

  • Tstag Tstag on Jun 30, 2012

    Not all EU countries are struggling with too much capacity. In the UK all our plants are at or heading towards capacity. So much so that the likes of JLR are looking to sweat the plants for more capacity. I wouldn't be surprised if a new car factory gets built in Britain.

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