Although the Western European auto industry has been hit hard by the worldwide recession, with first-quarter sales declining by 16.3 percent compared to a year earlier, government stimulus packages in Germany and France are mitigating the downturn in those nations, according to iSuppli Corp.

For all of 2009, Western European sales are expected to fall by 16.7 percent. However, as the economy recovers, regional auto sales are projected to increase slowly starting in 2010 and will return to nearly the 2008 sales level by 2014.

“Because automotive is among the most important of European industries-perhaps the most important-many governments have passed stimulus packages to help stabilize their auto markets during the recession,” said Egil Juliussen, principal analyst and fellow for automotive electronics at iSuppli.

“The most popular stimulus is the so-called scrappage incentive that gives buyers of new cars a discount if they trade in old cars that generate more air pollution than new, cleaner vehicles, Juliussen added.

The results are encouragingparticularly in Germany.

Germany’s incentive of 2,500 euros for a new car commenced in mid January and immediately impacted sales. The nation’s auto sales increased by nearly 17 percent in February, jumped by 40 percent in March and grew by another 18 percent in April, compared to the same months in 2008.

France’s incentive, which started in December, 2008, was much smaller at 1,000 euros, so its impact was somewhat lessened compared to Germany. First-quarter auto sales in France declined by 3.9 percent compared to the same period in 2008, which is actually a relatively strong performance compared to overall double-digit decline in Western Europe.

When viewed in its totality, Western Europe is the largest auto production region in the world. Western Europe is a net exporter of autos.

This makes it auto making a critically important industry for the region, prompting some governments to take action to shore up sales.
 
Economy puts the brakes on auto production
Auto production in Western Europe in 2009 is falling at an even faster rate than sales. This is due to lower exports, decreased sales in Europe and an overhang in inventory from 2008.

Auto production in the first quarter of 2009 compared to the same period in 2008 dropped by 46 percent in France, 33 percent in Germany, 40 percent in Italy and more than 50 percent in the United Kingdom. The result has been a terrible first quarter for automotive electronics suppliers because their sales depend on auto production.

The good news is that the first quarter of 2009 was most likely the bottom of the downturn for Europe and auto production declines will be smaller in the remaining quarters of 2009.

The attached figure gives more perspective on this recession and the aftermath summarizing iSuppli’s estimate of the auto electronics recovery in Western Europe.

The figure shows relative yearly sales for several electronics categories compared to 2008 auto sales which have been normalized to 100. The electronics categories are head-units, in-vehicle navigation, the Advanced Driver Assist System (ADAS), embedded telematics and the Bluetooth-based hands-free interface. The sales pattern is similar for most categories, with a decline in 2009 and growth returning in the following years.

The only area to rise in 2009 will be ADAS, which will manage a slight sales increase in 2009. ADAS consists of ultrasonic and camera park assist, adaptive cruise control, lane departure warning and blind spot detection systems.

Embedded telematics system sales have remained low in Europe and are waiting for the eCall mandate to be settled. eCall is a European Union Commission initiative and will need to undergo legislative processes that would take an average of 18 months for it to become an E.U. regulation-once it is submitted. Due to several contentious aspect of the eCall initiative, there is not yet an agreement, even after more than two years of discussions.

Hence, it looks like the eCall initiative is unlikely to become a mandate until 2011 or possibly later. The result is that the embedded telematics market will not take off for another two or three years in Europe.

Telematics services using the driver’s phone is doing better in Europe as Bluetooth-based hands-free interface systems are growing in importance. All major auto manufacturers offer such HFI systems on some or all of their models and their sales will continue to grow.

Discover more about the automotive electronics market with Juliussen’s latest report, entitled Navigation, Traffic and Telematics: Service Opportunities for the Future. Find out more about this report by visiting: http://www..isuppli.com/ProductDetail.aspx?ID=28513

Find out more information about iSuppli’s ADAS service by visiting: http://www.isuppli.com/Products/L2_DriverAssistTechnologies.aspx?PID=887
 
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