(Repeat for additional subscribers)
Oct 17 (The following statement was released by the rating agency)
The 5.4% rise in European new car registrations in September supports Fitch Ratings' view
that the market may see moderate sales growth in 2014. This should help EMEA auto manufacturers
boost profitability next year, together with their broader geographic diversification and leaner
Yet European sales should remain low in absolute terms compared with pre-2007
crisis levels, due to weak consumer and corporate confidence and limited
economic growth across the region. Demand is also being dampened by structural
changes - including the rising cost of car ownership, increasing vehicle
life-spans, and measures by some cities or countries to deter car ownership.
Taken together, these factors suggest that a return to pre-crisis sales volumes
could take until the end of the decade, if it can be achieved at all.
The September new car sales figures from the European Automobile Manufacturers'
Association show passenger car registrations in the EU rising to 1,159,066 last
month, from 1,099,468 a year earlier, but this is still down by around 18% from
1,412,400 in September 2005. Registrations in Germany, Europe's largest market,
were down again in September and have fallen by 6% in the first nine months of
the year. Registrations were down by more than 8% in that period in the key
French and Italian markets, but this was mitigated by the solid growth in the
Part of the overall sales increase is due to ongoing aggressive discounting in
the region as manufacturers attempt to at least maintain their market share.
This is hurting both revenue and earnings in Europe. The overall picture for
earnings in 2014, however, is modestly positive for European manufacturers as
higher sales growth in the US and some emerging markets will aid the more
geographically diversified companies such as Volkswagen, BMW and Daimler
The picture is mixed for Renault and Peugeot, which are the most exposed
to European markets. We expect Renault's profitability and cash generation to be
relatively resilient, with margins gradually strengthening as cost-cutting
measures and the shift of some production outside western Europe take effect.
We are more cautious about the ability of Peugeot to return to automotive
profitability and positive operating free cash flow by end-2014, especially as
pricing pressure is likely to be most intense in the group's main market
Fiat continued to underperform the market in September, with sales down by more
than 8% in the first nine months, as it was hit in particular by the weak sales
in its core Italian market. This poor performance compounds the uncertainty
regarding its potential merger with Chrysler.