By on January 29, 2013

 

Nissan-Renault CEO Carlos Ghosn said today that he does not expect any sales growth in Europe over the next three to four years. He is not giving up on growth, and said that most will come from higher demand in the United States and China, Reuters reports.

What Ghosn kept to himself is that there probably won’t be much growth in Europe after those three to four years either. Most likely, there will be a monstrous contraction of the market. When with his inner circle, Ghosn often talks about a “structural decline:” This is not a just one of these cyclical phenomenons. It is simple math:  Around 1970, as the pill became popular, births dropped by approximately half from their prior peak in the mid-sixties. This peak now sits smack in the middle of the prime new car buying age, which in most of Europe is between 40 and 60 years. The trailing edge of the peak already makes itself felt with lower sales. At around 2020, this peak will retire, leaving behind a drastically smaller pool of buyers.

European carmakers which at this point are not firmly established in growth markets, will be dead.  If you are just beginning to establish yourself now in growth markets, it will be too late.

We did these studies in the mid-1990s, when the dip which is now heading towards its 70th birthday created a crisis in the European car market. We predicted the crisis would be over soon, there will be a huge boom at around the turn of the Millennium, after 2010 it will get iffy with premium cars (older buyers) still going strong, and after 2020, 2025, we all want to live elsewhere, or be dead.

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72 Comments on “Carlos Ghosn Sees No European Growth For Years. There Will Be Even Less After That...”


  • avatar
    Omnifan

    Bertel, I always enjoy your research and point of view. Clearly there will be another reckoning in the world automotive industry sooner than later.

    • 0 avatar
      hreardon

      I’d say it will be a general reckoning in the European markets – not just the automotive world. Fewer young taxpayers will be expected to carry the weight of a growing elderly generation. The current European financial crisis is a prelude to what will be coming in the next 20 years.

      Agree 100% with Bertel that several automakers and brands are as good as dead at this point: PSA, Opel, FIAT and SEAT are at the top of the list.

      • 0 avatar
        rmswins

        The U.S. birth rate has been below 2 for several decades. The lack of growth in youth cohorts is not just isolated to Europe. I think we are already seeing the effects on Social Security’s cash flow.

      • 0 avatar

        @hreardon:

        Fiat has Chrysler and is market leader in the world’s 4th largest market and one that is still growing. Seat belongs to VW. Opel is still in GM. They won’t be going anywhere anytime soon.

      • 0 avatar
        hreardon

        Marcelo -

        You are correct that VW and Chrysler may not be going anywhere, but as brands, SEAT and FIAT are definitely among the weaklings of the brand. Volkswagen has hinted more than once that SEAT is a dead man walking and unless they can improve its fortunes, the brand is on borrowed time.

        FIAT as a brand may well be faced with extinction as well. While they have a good presence in South America, FIAT’s bread and butter is still southern Europe, the sickest of the sickly continent. Speaking of FIAT, we might as well place Alfa on that list of candidates for euthanasia as well.

        Opel – well, GM is doing its darnedest to rid itself of Opel, and judging by how they’ve been flailing about lately I wouldn’t be surprised if they are purposely trying to bankrupt and bury it under a sea of mismanagement.

        I get your point, Marcelo: these are players with big parents. That said, I have little doubt that VW will not hesitate to put SEAT down once the remaining VW brands can demonstrate that they will be able to carry forth the 2018 production and sales goals without SEAT. While Chrysler is no longer on its deathbed, neither is it a particularly strong or diverse automaker. The majority of its profits come from Jeep.

        While I agree that none of these will go away in the next 3 or even 5 years, I think things get very murky for these brands looking out past 10 years.

      • 0 avatar
        chas404

        Writing from Medellin, Colombia one of the faster growing good economy countries FIAT atleast has a bad reputation. Hyundai and KIA are killing the competition here on price and performance. Colombia has its own manufacturing plants in Medellin (Renault Logan and Duster) and Bogota (various Mazda and Ford products like Rangers) which they have protected with Euro style high car taxes. With the USA free trade pact this is going to change over the long run. I rarely see SEAT i think they have that cool GTI car here but super high cost due to euro taxes.

        Granted Colombia is a small market but in general South America is a growth area. I would say Kia and Hyundai are the future. VW is seen as OK. Renault does well with dacia/logan (I own one for a an airport car service) and other products due to being here for a long time but I think they are still probably fragile cars. Interestingly Chevy sells all Korean stuff like Spark Cruze etc. Ford is actually a high market brand with F150, fiesta, focus, Edge. I think the new diesel ranger is coming here and i think built in Bogota.

      • 0 avatar
        chas404

        It’s not just population although important. Simple econ is if you tax something 200% (euro car tax) and gas (300%) you will get less of it. Euros can have less pop but a better econ having people own more cars (cars per capita purchased imagine the USA has a high number).

        Due to socialist and high tax policies you have less growth/less econ and less cars purchased.

        Colombia has gdp 5% and yes younger population growing for middle class and wanting cars (despite high taxes (they are lowering them) and not carfriendly environment).

        The future is 3rd world countries with high growth lower taxes and yes growing populations.

        Europe could drop taxes tommorrow and sell a ton more cars.

      • 0 avatar

        Hreardon-

        OK, now I see.

        VW has the same problem with Seat as GM had with some of their brands. Namely, if they let it go they will lose an awful lot of customers in Spain. Not everybody who buys a Leon or Ibiza will automatically buy a Polo or Skoda. I guess though that Seat will become more and more a local brand. Those half-hearted attempts to transform it into a sports line in VW don’t make sense. In the great scheme of things if Seat went away tomorrow, few but the Spanish, would notice.

        Opel is more interesting. The moment to sell has probably passed. Guess only the GM higher ups have an idea. On the face of it, letting go of an established brand to try to introduce Chevy into Europe seems like a fool’s game. GM may be thinking that though to get rid of the high cost German workers. Plus there’s the interesting question if germany would allow the company to close.

        As to Fiat, well yeah, they depend on the southern most parts of Europe. I don’t know about Europe as a whole, but they sell more cars in Brazil than in Italy. As the margins here are surely better, the market is growing and as of last year Fiat was still gaining on the market, plus the growth of Chrysler in a rebounding American market, Fiat is pretty secure in the coming years. All they need (and it’s not easy by any means) is some sort of presence in Asia and they have the potential of competing with Renault-Nissan, Ford, GM, Toyota and the Koreans.

        Alfa Romeo appears to be on hold as Fiat concentrates on Chrylser and managing the Euro crisis. It’s good for Fiat to have them in their back pocket though as surely there is space for the brand in Latin America and maybe even China.

        Let’s see.

  • avatar
    tatracitroensaab

    Lol translation: Opel and PSA.

  • avatar
    Signal11

    And that’s not just the truth about cars, but the truth of the long term macroeconomics of anything, period.

  • avatar
    rmswins

    On demographic charts I’ve always liked seeing birth rates of cohort groups. This tends to show historical trends and impacts in a more direct fashion.

    On a side note I’m curious as to when/if we will see a cyclical return to birth rates over 2.

  • avatar
    CJinSD

    TTASH – The Truth About Secular Humanism. Atheism destroys entire civilizations.

    • 0 avatar
      rwb

      Nothing like a good stretch.

    • 0 avatar
      rodface

      I simply HAVE to ask you to PLEASE, PLEASE, tell me more about your thoughts on this.

      (Sits back, munching popcorn)

    • 0 avatar
      hreardon

      CJ – I don’t want to open up a bag of debate in this thread, but I think it’s suffice to say that when a society stops replacing the aged with new blood and youth it generally spells long term decline in dynamism, economics, social cohesion, etc.

      Why this is the case I care not to argue here, but it’s a disturbing trend whose implications for Europe, in particular, are severe.

      • 0 avatar
        mike978

        hreardon, I agree but at some point the population of the world must stabilize at some number. It cannot just keep growing and growing because we will run out of space and resources at some point to sustain an ever increasing population.

      • 0 avatar
        Lorenzo

        Mike978, as they say on Wall Street, past performance is no guarantee of future results. That applies to the world’s population, which is growing at a slower rate than in the past. Prosperity tends to lower birth rates, and the increasing wealth of the Asian tigers are seeing lower birthrates now. The result of China’s one child policy has altered it’s demographic curve as well. The decline of European and Russian population now underway adds to the decline of the world’s population. The result is that demographers who predicted the world’s population peak at 12-14 billion have now reduced the peak to 10-11 billion in a couple decades, after which it will decline.

        Increasing population is not the only driver of growth, improving quality of life does it too, and even after the population has become stable, there will be growth, though at a smaller, more incremental pace. If demographics aren’t enough, there’s always the four horsemen: natural disasters, pandemic disease, large scale war, and stupid leaders, with two or more combining for extra effect.

      • 0 avatar
        mike978

        Lorenzo – thanks, you made my point, that growth will be much slower when the population stabilizes (obviously some variation since not all countries will grow at the average). So to hreardon’s original comment we may have decline in dynamism, economics etc.

    • 0 avatar
      Lumbergh21

      This isn’t a phenomena peculiar to secular humanism or atheism. Societies just seem to run out of gas so to speak and a general malaise sets in with regards to the future generations. I am no historian but this seems to frequently also result in a level of hedonism, a focus on the pleasures of the moment, at least in western history. A decline in population in a society of people focused on themselves is not at all surprising. To say that atheism results in a focus upon oneself isn’t exactly a revolutionary idea. However, to say that only atheism brings about self love, self adoration, etc. is incorrect in my opinion. No nation or civilization lasts forever.

    • 0 avatar
      chaparral

      TTAX – Xenophobia destroys civilizations. Can’t produce enough people domestically? Bring ‘em in from overseas. Worked pretty damn well for America!

      We had 1,200,000 immigrants in 1907, on a population of 90,000,000. Around 1.5% of the population had stepped off a ship in the past year; over 10% in the last decade.

      Do you think that having 700,000 new Frenchmen show up next year would hurt France? 900,000 new Germans hurt Germany?

      • 0 avatar
        Chicago Dude

        Now you know why the United States has never taken illegal immigration seriously.

        Our natural birthrate isn’t all that great either…

      • 0 avatar
        corntrollio

        “Now you know why the United States has never taken illegal immigration seriously.”

        Yes, clearly we haven’t stepped up the pace of deportations in the last 4 years. Except that we have… The enforcement of immigration laws by the executive branch has been quite strict.

        The economy has also made a difference — fewer people want to come here.

        The current policy putting more restrictions on educated and skilled workers (including people who were educated here) will have a negative effect on our economy. It’s the legislative branch that hasn’t been doing its job — Congress has plenary power over immigration laws.

      • 0 avatar
        Lorenzo

        “Do you think that having 700,000 new Frenchmen show up next year would hurt France? 900,000 new Germans hurt Germany?”

        Chaparral, you’re missing the point: they won’t be “real” Frenchmen; they won’t be “real” Germans. Here, you can just raise your right hand and swear allegiance to the U.S. of A and you’re an American. In Europe, the population is downright ethnic. I believe you still have to show a blood relation in Germany for full citizenship. That’s why Turks remain guest workers there. Muslims from formerly French Algeria live in separate enclaves. There’s no melting pot.

    • 0 avatar
      Georgewilliamherbert

      There is nothing secular or humanistic about the economic theory of austerity, which in the face of a recession is approximately suicidal.

      The problem here is that Germany got the Austerity bug for a good reason (had to save, to absorb East Germany) and then in the same vein attempted to apply it to another scenario completely (worldwide economic recession), and successfully dragged Europe along for the ride.

      Epic fail, but at the macroeconomic and political levels, nothing to do with religion or lack thereof. Most of the austerians are good Christians. Whose vows of poverty are becoming self-fulfilling…

      • 0 avatar
        Lumbergh21

        Oh yes, we all know the best way to overcome unsustainable debt is to borrow more so you can spend more. Works every time. the very thought of reduced governemnt spending or at least reduced increases is ridiculous and harmful.

      • 0 avatar
        corntrollio

        Actually, the best way to overcome debt is to grow the economy such that revenues overcome the amount of debt. That’s how the US has gotten out of every other incidence of high debt-to-GDP in the past.

        Austerity only works to a point and only under certain conditions. In fact, it’s best when the economy is booming, not when it’s down.

      • 0 avatar
        Georgewilliamherbert

        Right. Regardless of your feelings about running a deficit normally, in a recession government spending is well – WELL – documented as helping moderate the effects. The net economic benefits, including the long-term payoffs of the bonds you sell for the recession deficit spend, are clearly net positive no matter how you cut it.

        People are richer in out-years after paying the taxes to pay off those bonds than they would be if the recession lasts longer and is deeper. If you don’t spend the money earlier everyone is several times net poorer later by much more than the additional taxes cost in out-years.

        Austerity under boom conditions is a reasonable choice; austerity in a bust, a recession, or depression is barking mad.

    • 0 avatar
      Ubermensch

      Oh tell us wise CJ, which invisible-magic-sky-man are we to believe in so that civilization will be saved? Or does it not matter that the things we believe in are true or not? I’ll take secularism over the hell on earth that religious divisiveness has wrought.

    • 0 avatar
      Summicron

      “Atheism destroys entire civilizations.”

      Can I get that in an aerosol?

    • 0 avatar

      Read “Childhood’s End” by Sir Arthur Charles Clarke. Its about Europe’s bright future.

    • 0 avatar
      Ubermensch

      Stay classy CJ.

  • avatar
    tmkreutzer

    Not to make light of what looks like a frightening demographic trend, but does anyone else think that these shapes look like the profile of a person who has bushy eyebrows, a bent nose, puffy lips and a weak chin?

  • avatar
    Darth Lefty

    I’d like to see an older version of this graphic. The “dip” – now minus 68 years is babies not born due to the deprivations of the war. There should be a kink in the male curve about 20-25 years prior for war dead, but that demographic is coming to its end now and it’s hard to see on this scale.

    That’s pretty awful to think about. I keep telling my 77yo Dad (who eats nothing but news TV, and thinks the world is going to hell) that the problems we face now are laughable compared to those already solved.

  • avatar
    1998redwagon

    considering how many german men of all ages fought and died in wwii i am amazed that the profiles for men and women are so similar.

    perhaps there will be a bimodal distribution of car sales in the future. if i recall correctly sales of luxury cars on the continent and specifically germany have not decreased as readily as general car sales. So perhaps the appetite for luxury, high end cars exists for those who can afford them?

    the rest of the masses. what type of car can they afford? do they need one? as expensive as it is to have a car in europe (germany) perhaps the need for micro-cost cars is real. if so are europe and other places headed for a lux and micro lifestyle?

    • 0 avatar
      Darth Lefty

      I was looking for something similar but the population who went to war are bascially dying of old age now (if someone was 18 in Jan 1938 he’s 93 now), so it doesn’t really show up.

      I found a similar chart of US Census data. It follows basically the same trends but is not as dire. You can see the baby boom peaking in the late 50′s and then tapering off due to the pill. After that it pretty closely follows the economy.

    • 0 avatar
      bumpy ii

      The peak in the low 70s represents the Nazi-sponsored baby boomlet, the dip just above 70 is the lack of births during the war, and the brief trough is the higher infant mortality circa 1945. Below that, it’s pretty much the standard postwar Western pattern.

  • avatar
    KitaIkki

    “The future belongs to those who show up”

  • avatar
    Pch101

    The EU 27 added about 100 million people over the last five decades, an increase of about 25%. Making the EU attractive to immigrants can compensate for declining birth rates, which are an inevitable byproduct of industrialization.

    Compared to the US, new car registrations in the EU are low. If priced and taxed at the right levels, car sales in the EU have room to increase. The question in this case is whether anybody really wants that.

    • 0 avatar
      Lumbergh21

      While I can’t vouch for your data – that would take time and effort – I totally agree with your analysis.

    • 0 avatar
      PenguinBoy

      @Pch101 – I can see immigration offsetting low birthrates even more in North America.

      Ghosn’s analysis seems sound, but I don’t think that’s necessarily good news for Nissan. There’s lot’s of GM hate on this site, but GM seems to be outperforming Nissan in both China and North America, and unless they pull off a Chrysler style turnaround in the desirability I don’t see any reason for this to change. Right now, the Altima and G37 seem to be the only competitive Nissan products, the rest of the product line doesn’t stand out from the competition in any way.

      • 0 avatar
        Pch101

        “Ghosn’s analysis seems sound, but I don’t think that’s necessarily good news for Nissan.”

        Ghosn has to deal with both macroeconomic issues (which he can’t fix) and business problems specific to Renault (which he conceivably might fix, but probably won’t.)

        As does everyone else in Europe, Renault faces a recession/ austerity problem. Just so long as the Germans dominate Euroland’s central banking and economic policies, he’s pretty much screwed in that regard.

        But Renault also has a product problem. Years of French protectionism helped to encourage output that lags the competition, and now they’re suffering the hangover from that. The German automakers (sans Opel) have more appealing vehicles and consequently much better branding. VAG et. al. are therefore better poised to benefit from a European economic recovery for the simple reason that European consumers generally prefer their cars.

    • 0 avatar

      @ Pch101:

      “The EU 27 added about 100 million people over the last five decades, an increase of about 25%.”

      Absolute balderdash. There was no EU27 fifty years ago, there was not even a EU. Bulgaria and Romania turned the EU into EU27 in 2007.

      In THE AREA THAT TODAY IS THE EU27, the population grew by 19 million since 2002, from 485 million to 504 million, up 3.9 percent, or an annual average growth rate of 0.39%. The population of the EU27 is expected to peak at 526 million around 2040, with about two wage earners for each pensioner.

      “Compared to the US, new car registrations in the EU are low. If priced and taxed at the right levels, car sales in the EU have room to increase.”

      Nonsense. The Euro area, on average, has some 600 cars per 1000, which is considered above saturation levels. There are growth opportunities in Eastern Europe, successfully exploited by VW. The USA stand alone in the world with more than 800 automobiles per thousand, only eclipsed by city state Monaco.

      (Lower numbers shown for the U.S. are false and forget to account for pick-ups and SUVs that are counted as trucks …)

      • 0 avatar
        skor

        “The matter could be easily settled by admitting Turkey into the EU. They are begging for it. 80 million more at the stroke of a pen. Hard working, honest people. Population relatively young. Love to have babies. Exactly that’s why Europe does not want them. They are scared of being taken over.”

        Have you ever been to Turkey outside of Istanbul? Most of rural Turkey remains solidly in the third world. Provincial Turkey makes Mexico look like Switzerland by comparison.

        Hard working? So what? Russian peasants worked hard. There is a difference between hard work and working efficiently.

        Love to make babies? Yup, and arranged marriages are the norm, while blood feuds and honor killings are all too common.

        Honest? When they have to be, when they have the upper hand, it’s quite different…..especially when dealing with outsiders. It is not the absence of sin which defines the righteous man. It is the personal rejection of sin which defines the righteous.

        I’m sure the Europeans don’t want them because they fear “being taken over”. I mean, the 400 years of dhimmitude that the Southeastern Europeans were blessed with produced a golden age for them. Right?

        Fact is that the average Turk views Western ideals of personal freedom and liberties as idiocy and weakness.

    • 0 avatar
      Pch101

      “There was no EU27 fifty years ago”

      Thanks for the pedantry. But the point remains is that the population of this area is increasing, contrary to the assertion made in your blog post. That is simply a fact, and you can confirm it with Eurostat if you like.

      “The Euro area, on average, has some 600 cars per 1000″

      You are confusing total vehicles with new car registrations. New car registrations are a reflection of CURRENT sales and leasing, not TOTAL vehicle count.

      Compared to Americans, Europeans pay a lot for cars and car ownership. Unless somebody rewrote the laws of supply and demand while I slept last night, reducing some of those prices could increase demand.

      New vehicle sales and leasing activity could conceivably be increased there if the cost of those was reduced, since they otherwise have the level of affluence required to support it. But I doubt that will happen for a variety for reasons, some political, some not.

      • 0 avatar

        A population that grows by 0.39 percent per year is essentially flat. The bad part is that most of what little growth there is is in the pension age segment, which does not buy a lot of cars. In this business, you need to look at the age segment that actually buys cars. Hence: In future years, your core market will be shrinking dramatically. It already does.

        Furthermore, you need to look at it through the lens of your market. In the EU’s largest car market, in Germany, total population peaked in 2000 at 82.9 million. It is going down. In 2060, it will be 70 million. Already, the age groups under 20 and above 60 together are 44%.

        The story focuses at the age group where cars are bought. Pensioners and babies are not a good target group for cars. The EU target group for cars is diminishing.

        I am not confusing total vehicles with new car registrations. You need to look at total vehicles when looking for long term growth opportunities. When you see more than 500, 600 per thousand, you know the market is saturated and only good for replacement sales. Once at saturation, the market will directly reflect population swings within the buying bracket.

        Looking at new car registrations, they are dismal. According to ACEA, “demand for new cars reached the lowest level recorded since 1995.” Which happens the year when that now close to 70 year old dip sat in the main new car buying age band. The market reflected population swings then and it does now.

        One way to increase new car sales would be to widen the band by facilitating an earlier entry into the new car buying bracket, thereby extending your buyer pool. Easier said than done. In Europe, young people buy used to save. Once they have arrived, they buy new, and a few thousand more don’t really matter. Financing and private leasing only goes so far to lower the bar of entry. Carmakers quietly worked on this for decades, with little success.

      • 0 avatar
        Pch101

        “A population that grows by 0.39 percent per year is essentially flat.”

        My point remains that the Europeans could conceivably deal with this by increasing immigration. There are plenty of people in the developing world who would like to relocate for better opportunities, but first world governments have to endeavor to provide those opportunities and promote them.

        All industrialized nations have to deal with declining birth rates. Birth rates and family sizes have declined in the US, yet our population keeps growing.

        “Looking at new car registrations, they are dismal.”

        Yes, they are. That was my point earlier. They should be heading upward from their current levels.

      • 0 avatar

        “My point remains that the Europeans could conceivably deal with this by increasing immigration.”

        Good suggestion, but they won’t listen to you. Even in Europe, politicians want to be re-elected. You get elected by kicking the verdammte Auslaender out. Immigration from outside the EU27 has been flat at a low 1.5 million level for the last years.

        The matter could be easily settled by admitting Turkey into the EU. They are begging for it. 80 million more at the stroke of a pen. Hard working, honest people. Population relatively young. Love to have babies. Exactly that’s why Europe does not want them. They are scared of being taken over.

      • 0 avatar
        Athos Nobile

        On the immigration front they would do a good thing luring back the descendants of the Europeans that emigrated long time ago and nowadays hold a EU passport.

        That people like to have babies, share part of the culture and background and there’s little risk of having a language barrier. More often than not they have good education, skills and experience.

        Do any EU country have a baby bonus?

  • avatar
    Vance Torino

    Wow, the birth cohort of ’44 is totally under-represented.
    :(

    The Dutch found it hard to get it on in Amsterdam when all they had to eat was a tulip bulb.

    The Germans had it worse, erotically.
    Fire-bombings, starvation, and fear of a Russian bayonet will do that.

    Not to mention guilty limp-dick for supporting fascism.

  • avatar
    sportyaccordy

    This is a really cool insight. Thanks for this.

  • avatar
    Big Al from Oz

    I really think if you look back to the Oil Crissis of the 70s you will see the beginnings of the global market leaders now.

    The oil crissis impacted all OECD economies and buying “cultures” for automobiles.

    The Big 3 maintained a model of building local products in their foreign factories ie GM Opels, Vauxhalls, Holdens. Ford had Ford Australia with Falcon and Ford England with Escorts, Transits etc.

    The German and Japanese manufacturers capitalised on their ability to provide single model vehicles that appealed to many across the globe and expanded their markets significantly.

    The strongest future auto manufacturers will be the ones who started back in the 70s to globalise their market shares ie VW, Toyota, BMW,etc.

    The only real manufacturer that will be significant outside of German and Japanese are the Korean Hyundai/Kia manufacturer. Others will struggle. I don’t know how the Chinese will proceed, they will sell extremely competitively priced vehicles to suceed.

    The US market might improve, but it is destined to fail again, because of the design regulations, CAFE/EPA regulations are different to the rest of the world (OECD). The difference were designed as trade barrier to protect the US industry. And what have they left? Pickups, they are the money earners and how long will that stay.

    Europe might not sell as many vehicles, but a few manufacturers will increase sales for export.

  • avatar
    Big Al from Oz

    After reading some of the comments posted, I do think that the comments are written by people who require a little more education on economics.

    First I would like to point out that austerity isn’t bad. It is how you target your auterity measures.

    Here is a quick piece of history explaining how we have come to be where we are at.

    Events now started over 150 years ago, but I start after WWII.

    Europe and Japan were virtually destroyed with very little infrastructure and industry. To repair these countries required a approach that was similar as managing mega projects. The only organisations and institutions able to manage these projects were the governments, hence the current dependence of these countries peoples’ on government ie welfare, industry etc.

    Countries like Australia, USA, Canada, New Zealand etc didn’t have the same impacts affecting their economies like the Euro/Japanese did. We have much smaller government involvement.

    The Euro/Japanese GDP’s were quite low and the US controlled 50% of the globes GDP, unprecedented in mankinds history.

    These lower income Euro/Japanese economies were able to produce cheap products to export to the US, hence the US built a wall of protective measures in agriculture, industry etc to protect itself. Sustainable in the short to medium term but not the long term. The Euro/Japanese did the same but to help increase exports and protect from imports.

    The European industrial expansion was more insular than the Japanese who began setting up industrial complexes in SE Asia since the 70′s. The Europeans maintained more industry at home to export.

    The author of this article infers that because of “old age” the motor vehicle industry in Europe will decline and affect the manufacturers, but as I pointed out in the above post the Germans will not be in the same boat. The French who had quite an insular motor vehicle industry will feel the pinch.

    The Japanese who currently have more “old aged” people in comparison to the Europeans doesn’t have a motor vehicle industry in the same boat. Why? Because they decentralised and off shored manufacturing successfully. So the European argument is more about management than old age.

    Back to austerity, subsidisation has to be curtailed significantly to prevent most OECD economies from falling over. The motor vehicle industry is quite heavily protected with cheap loans, bailouts, tariffs, regulation, etc.

    Agriculture is the same, nearly most industry has some form of government assistance/protection in the Euro/US/Japanese economies. And globally they are the worst off.

    A phasing out of subisidies and restructure that will occur will right most of the wrongs. Efficiency gains by countries will be significant, then tackle welfare.

    If a country can’t compete then don’t use government money/regulations/tariffs to support an industry that is failing.

    This will create inefficiencies that will cost jobs and cost more in welfare. It will be painful for some industries, but the countries will eventually prosper.

    • 0 avatar
      Ubermensch

      “After reading some of the comments posted, I do think that the comments are written by people who require a little more education on economics.”

      You must be new here.

    • 0 avatar
      jeoff

      I am not sure how what Bertel wrote is inconsistent with your analysis. He said that the market in Europe for cars is contracting, and only the companies that have established their brands in high growth areas will survive. You seem to be saying the same thing (calling it “decentrailization”). Both of you would seem to claim the Japanese and the top Germans will do well, and the PSA not so much.

      • 0 avatar
        Bertel Schmitt

        I discussed this with Derek. Commenting rules will be amended. Anyone who complains about a story must have read the whole thing (there will be a quiz.)

        People may praise a story after just looking at the fine pictures.

    • 0 avatar
      Pch101

      “After reading some of the comments posted, I do think that the comments are written by people who require a little more education on economics.”

      Presumably, you were staring intently into your mirror as you made that comment. Some of what you have said is partially accurate, but much of what you’ve said is painfully wrong.

  • avatar
    Bertel Schmitt

    I discussed this with Derek. Commenting rules will be amended. Anyone who complains about a story must have read the whole thing (there will be a quiz.)

    People may praise a story after just looking at the fine pictures.

    • 0 avatar
      Pch101

      “real US unemployment hovers around 16%”

      I find it kind of comical that some people have stumbled upon the U-6 unemployment rate, only to assume that it is the only “real” figure, while the other five (including the U-3, which is the actual “real” rate) are not.

      Statistical abuse is worse than statistical ignorance, because the former is based upon feigned knowledge. It is preferable to learn more about such things prior to forming judgments about them, lest your judgments prove to be flawed.

      The reality is that even in a good year, the vast majority of the population does not participate in the new car market. The vast majority of cars that are sold in a given year are used, and of course, there are many years when the typical household doesn’t participate in either the new or used vehicle market.

      The car industry does not require even a substantial minority of the population to buy a new car each year. If that was what was needed, then the whole thing would have collapsed a long time ago.

      Renault’s problem as a brand is that it can’t compete in the European company car market, which is critical for any automaker that wants to succeed in Europe. It lacks the prestige vehicles that are needed to provide a halo to the lower level cars and to secure corporate fleet deals. As a consequence, its best hope is to try to use lower level products (including Dacia) to niche the part of the mainstream market that are outside of the focus of the company car giants (BMW, Mercedes, VAG).

      It is worth noting that every automaker in Europe that is struggling there has one thing in common: the lack of a compelling premium brand. To lock in the middle of the car buying chain in Europe requires strong branding in the tier above it. The danger to the likes of Renault is that the Koreans end up beating them to it.

      • 0 avatar

        @ Pch101:

        “The car industry does not require even a substantial minority of the population to buy a new car each year. If that was what was needed, then the whole thing would have collapsed a long time ago.”

        In other words: The auto industry is recession-proof, as long as it finds enough rich suckers who buy the overpriced machines. I hope you are making these comments strictly on an amateur basis. Woe are the rich suckers who pay for that advice.

        The above may be true in an expanding market like China, or India. In the saturated first world markets, just the opposite is true.

        The auto industry is the epitome of a cyclical industry. It rises and falls with the economy. In some cases, it can make an economy rise or fall. Auto sales, such as those reported tomorrow, are used as indicators for the health of the economy.

        We pay more for “transportation” (and in America, that’s mostly cars) than for food. The used car buyer, the taxi driver, even the worker that bikes to a factory making plastic parts, they all are part of the automotive ecosystem. It is more fragile than wetlands. If the used car buyer, who allegedly has no influence, can’t afford a used car anymore, prices drop, residuals drop, financing costs go up, new car sales head down. So yes, when people suddenly have less money, car sales go down. Car sales especially go down if there are fewer people to buy them. Car sales go down a lot if there are fewer people who also have less money. Only a charlatan will say this is not true. Which is not to say that there won’t be people willing to listen and give money to the charlatan. People who are told they don’t have long to live tend to do the most silly things.

        So, premium cars are the secret to success? They were. A look at the graph above will tell you that in a few years the currently surprisingly resilient premium car market will start to contract, at least in Germany and most of Europe, and in about 10 years, premium sales will lay in ruins. Premium car buyers are quite old, usually over 50, buyers of the bigger Mercedes are around 60. Soon, they will retire. No customers, no sale.

        This is why smart OEMs around the world are no longer betting their future on premium cars. They are doing just the opposite. Premium bets had to be placed 20 years or more ago to be successful today. Now OEMs work on low-cost cars, some even on ultra low-cost cars for a time when the developed markets won’t be rich anymore, and when developing markets need low cost transportation in huge masses. Premium makers like BMW even invest into car sharing companies as a hedge against people no longer buying cars. The trick is to make money with low cost cars, and the Renault which you despise so much happens to be the Houdini of this black art.

        When you build a new car, you need to plan for more than ten years out. When you start a factory, you must plan for many decades. When you start a brand, you better bring enough time and money to last half a century. For that, you better have your macroeconomics down, and you better stop listening to the nanoeconomic nonsense, dished-out by self-styled experts which this industry attracts.

      • 0 avatar
        mike978

        PCH : “It is worth noting that every automaker in Europe that is struggling there has one thing in common: the lack of a compelling premium brand.”
        Hyundai-Kia are doing well in Europe but do not have a premium brand, compelling or otherwise. So having a premium brand is not necessary for success in the European market. I agree with Bertel, that the state of the economy in saturated markets has a direct effect on the auto industry. It may not always be immediate, like the UK had a surprisingly good 2012, but it will catch up and as such I expect the UK market to join the Euro decline in 2013.
        I also agree that cheaper cars, like the Dacia range, will be a significant part of future growth as people look to reduce expenses.

      • 0 avatar

        Hahahaha Bertel, tell it like it is! Nothing like a real pro to set the record straight.

        In Brazil, Pch101, the makers did exactly like you said for many years. At its height they could find 1 million maybe a million and a half rich suckers who would pay the equivalent of 30 000 dollars for a VW Beetle top of the line. Or mre than 50 000 for an old Chevy Opala (based on the Opel Reckford(sp??)). They lived, and they propospered. Parking was easy and the traffic flowed. Times were good. Brazil was not even in the top10 world markets.

        Then along came Fiat, betting that the future was in small cars. Extending credit to the working stiff, forcing others to lower pricing, even adding some new fandangled tech (transversal engines, FWD, ethanol cars, crumpple zones). Of course the enthusiasts hated it. Oh the cheapness of the cars! How small! A real car was a RWD VW Brasilia or Ford Corcel! But the market grew. Now about 4,000,000 cars find a home each year. I can’t calculate how cheaper parts, mechanics and just the availability of replacement items have become. In the past, an old car (+5 years) was a hassle partly due to the difficulties in maintenance. That’s a thing of the past (except of course in the case of the premium brands that cater to the super rich. Then you’re stuck with the dealership and if your car is dropped from the line, well good luck in the upkeep of your car).

        I’m old enough to remember that in the 80s and 90s, many expected the likes of BMW to fold. Lux makers fell left and right to run of the mill makers (Alfa to Fiat, Jag to Ford etc. and ad nauseaum). The truth is that the mainstream makers have the volume and power to last through the hard times. A company cannot depend on corporate fleet sales forever. In Brazil, Pc101, I’ve seen this picture before. In the 80s, at the height of the debt crisis, market leaders were such things as Chevy Monza and Ford Escort. Sold to higher middle class people and up, it’s exactly like in Europe today. Heck, 10 years ago, super expensive things like Corolla, Civic, Chevy Vectra would make it into the top 10 in sales. Now they can hardly get into the top 20.

        You know why? Because real middle class and lower middle class is now buying cars. Ford can’t keep up with depend for Kas (while new Fiesta languishes at the dealers), Fiat sells every Palio, Uno, Siena they can put together (while Punto needs constant promotions to move). If you go to a BMW dealer, I’m pretty sure you can find a brand new Series 7. MOY 2011.

        Like Bertel said, Renault is fast adpating to these times. The Dacia is an unbridled success story. I know how hard Fiat has studies the car. Engineers from Fiat I talk to are amazed by the creative, out-of-the-box thinking that went into making these Dacia cars possible. What’s more, they’re impressed with the quality (I went out and bought one of them after I heard that story!). Renault-Nissan is set to become one of the top dogs in the world soon. Renault is doubling the capacity of their factory in Brazil. Nissan is building their very own. They own Lada, they’re entering and selling (Duster) in India. Meanwhile, BMW is setting up shop in Brazil. How soon before one of them, a stripped-down, cheapened-down, hollowed-out BMWs make it to America?

        I can’t blame PCh101. To live in America is to see the world in a distorted lense. Things like Lexus, Acura, Infiniti, Eqqus are play things to sucker rich Americans. They’re not needed in the rest of the world. In Brazil, and much of the rest of the world, a Corolla is like a Buick, while a Fusion is a BMW. A BMW is a Bentley and a Rolls is something unimaginable.

        The future belong to VW, GM, Toyota, Renault-Nissan, Hyundai-Kia. Maybe Honda. Maybe Fiat-Chrysler. Surely not BMW, Mercedes, Jag.

        Good day.

      • 0 avatar
        Pch101

        “In other words: The auto industry is recession-proof, as long as it finds enough rich suckers who buy the overpriced machines”

        No, I never said that. On the contrary, the automotive industry is cyclical and is profoundly impacted by economic cycles.

        What I did say was that most households don’t participate in the car market in a given year, and no automaker operates on the assumption that they do. That is simply a statistical fact — there is no way that anyone can ever expect to sell that many cars, so they must build and price, accordingly.

        What all of you are missing is that Renault would be in trouble in Europe even without a recession. They are poorly positioned to take on the Germans, regardless of the economic situation in Europe. They resemble GM in North America before the bankruptcy — poorly branded vehicles, generally not well regarded, that lack pricing power. Economic conditions make this worse, but they didn’t cause the underlying problem.

      • 0 avatar

        @ Derek, thanks! Feel free to use it.

        @ PCh101, sorry man, this time you’re just wrong.

        BTW Derek, you got mail.

  • avatar

    Note: We may be experiencing database problems. Some messages are irretrievably lost, some have wrong avatars etc. This is not the work of censors, but of machines gone berserk. Investigating.

  • avatar
    Big Al from Oz

    @Pch101
    You sound like you have a degree in the arts and should become a leftwing finance minister. If you want to sound knowledgeable on certain topics and discredit anothers observation the least you can do is respond to what you percieve as an inconisistency or just refute what I have stated, but at least detail what issue you have found inaccurate.

    I then will expand my argument to justify my viewpoint.

    You don’t know what I know and have studied.

    The French are losing out because of the way the “French” Big 3 have been managed by government, unions and the companies themselves, similar to the “socialist” approach that the US is using to protect it’s indigenious vehicle manufacturers.

    Study the economic history of the world and start back prior to the War of Independence and see how it evolved. Once you have done that then we might have an interesting debate.

    What I wrote I will stand by.

    Your idea on who can afford vehicles is quite incaccurate. What built the vehicle manufacturing industry is the ability of the middle class and even the working class to afford them. Read up on a guy called Henry Ford.

  • avatar
    RobertRyan

    ““My point remains that the Europeans could conceivably deal with this by increasing immigration.”
    An issue that is pretty painful at the moment in the US. European reactions are pretty similar, especially as regards illegal immigration..


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