Fitch: European Auto Sales To Fall for Sixth Year, U.S. to Grow

  Fitch: European Auto Sales To Fall for Sixth Year, U.S. to Grow

Business Wire

CHICAGO -- December 21, 2012

Link to Fitch Ratings' Report: 2013 Outlook: Global Automotive Manufacturers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=697094

Vehicle sales in Europe are likely to fall for a sixth straight year in 2013,
extending damaging price wars as mass-market manufacturers seek to protect
their market share, Fitch Ratings says. In contrast, U.S. and Asian
manufacturers will enjoy continued demand growth, reflecting a stable overall
outlook for the sector.

We expect auto sales in Europe to fall by a further 2%-3% in 2013, on top of a
roughly 8% drop in 2012. Sales have been worst hit in France, Spain, and
Italy, but the German market also began to soften in the second half of 2012.
We believe German sales may fall in 2013, offsetting any potential recovery in
other markets.

The years of falling sales in Europe have led manufacturers to engage in price
wars to protect their market share and secure a minimum level of activity to
cover their high fixed costs. This is mostly affecting mass-market brands such
as Fiat, Renault, PSA, GM's Opel, and Ford of Europe. These manufacturers also
face the lingering problem of overcapacity, which they began to address
seriously in 2011 by announcing plans to close plants. More measures along
these lines are inevitable. However, the benefits will take time to show, and
there will be significant short-term costs from severance packages.

Outside the European mass market, prospects are rosier. U.S. and Asian
manufacturers, along with Europe's luxury manufacturers, will benefit from
steady demand growth. We expect U.S. light vehicle sales in 2013 to be around
15 million units, up 4.7% on the seasonally adjusted annual rate at the end of
November. We also believe sales could continue rising for the next several
years, although they may not reach the 17 million annual peak seen in the last
cycle.

China sales growth will continue to moderate from the booming levels prior to
2011, but will still be in the mid- to high-single digits. Premium brands will
also have the best growth potential in China due to low penetration levels the
more limited impact of government regulations compared with mass-markets
brands.

For more details on our expectations for the auto sector in 2013, along with
the potential impact of other risks, such as the U.S. "fiscal cliff," see
"2013 Outlook: Global Automotive Manufacturers" published today at
www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article can be accessed at
www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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