European car industry

Jodie Humphries

The European car industry is a very volatile industry with many peaks and falls. In fact, the EU is the world's largest producer of motor vehicles, so essentially it is central to Europe's prosperity.

As such, the European car industry is an employer of a huge skilled workforce. It also represents Europe's largest investor in research and development and makes a major contribution to the EU's Gross Domestic Product (GDP), the European Commission states.

Recession

The European car industry has been deeply affected by the recession, so much so that governments throughout Europe and the world have passed stimulus packages to help the industry.

"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," says Egil Juliussen, principal analyst and fellow for automotive electronics at iSuppli, to Electronics Weekly. "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."

A May 2009 report from the BBC states that the global car industry was in crisis due to the recession, and how may companies had needed government help to survive.

Germany

Germany's incentive of 2,500 euros for a new car started 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

France's incentive, which started in December, 2008, was 1,000 euros, so its impact was less. The 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 Europe.

UK

The British motor industry has always been export oriented. The industry employs about 850,000 people and produces about 1.5 million cars and 216,000commerical vehicles per year, 75 percent of which are exported. The UK is the 13th largest automobile producer in the world.

In the UK, there is the scrappage scheme which started in May 2009, where you qualify for a discount on the price of a new car of GBP£2,000 if you trade-in a qualifying old car. The scheme, which originally had GBP£300 million allocated, was due to end at the end of February. But the business secretary, Lord Mandelson announced at the end of September that a further GBP£100 million would be allocated to extend the scrappage scheme to cover 100,000 more cars and vans.

The GBP£2,000 is made up of GBP£1,000 from the government and GBP£1,000 from the motor industry. To be eligible for the scheme, your old vehicle must be first registered in the UK before 31 August 1999 ('T' reg and earlier). The Claimant keeper must have been the registered keeper for at least 12 months before the new vehicle order date, it states in the guidelines on the UK scrappage Scheme website.

When the scheme was announced in May, Paul Williams, chairman of the Retail Motor Industry Federation told British newspaper The Guardian: "The introduction of a vehicle scrappage scheme will boost the new car market, encourage consumers to get back into car showrooms, and reduce the likelihood of employee downsizing in this sector."

Spain

In 2009 the automotive industry generated 3.5 percent of the country's GDP and gave employment to about nine percent of the working population. In 2008 and 2009, Spain showed a decrease in car production. The downward spiral started about ten years ago, with an abandoning policy of many consecutive governments. The result has been the loss of all Spanish car brands manufacturers, which are now in hands of foreign companies.

Industry

As the European car industry is volatile, it is always going to need support. It relies on demand, if that demand isn't there, it's a vicious circle as it is such a large employer, and as there is so much investment in the industry.

After the debacle that was the failed sale of Opel, the European arm of General Motors (GM) to Magna, all eyes have been focused on the European car industry. For the near future, things look like staying this way.