The president of the Association of European Vehicle Logistics (ECG), Costantino Baldissara, has renewed calls for a second incentive scheme to stimulate sales across the region as a means of staving off the impact of a second recession.
Addressing delegates at last week’s ECG conference held in Paris, France, Baldissara warned that without a renewed programme of scrappage incentives, similar to that offered by European governments in 2009 and 2010, the logistics sector, and the wider automotive industry, could be devastated by a repeat of the economic downturn that followed the collapse of Lehman Brothers in 2008. He added that, as a consequence, some operators could disappear because they currently cannot support a reduction of profit.
“Business cannot survive if there is not a push in consumer confidence,” he said, adding that the governments needed to “push the system” to ensure a more positive future.
“If there is no serious, concerted plan of action to deal with the sovereign debt issues emerging across Europe, and to halt the contagion as it spreads to the banks, then consumer spending will simply grind do to a halt,” he explained. “That would be disastrous.”
Baldissara suggested that if European governments calibrated incentive schemes correctly, with lower incentive levels that Germany or France had offered previously, then governments could actually stand to make money on such incentives, which he claims had been the case in Italy. He also suggested that schemes should be extended to replace older trucks in Europe.
According to Baldissara there are still 77m vehicles on European roads that are more than 10 years old. Replacing just 5m of those cars would bring significant benefit to the market he said and equate to an increase of $60m in European GDP.
“If I was a member of the Commission I would propose to apply this in Europe,” he said.
However, Carlos Da Silva, senior market analyst at IHS Automotive said that, given the current focus on fiscal tightening by most European governments, renewed scrappage incentives were extremely unlikely. Rather, he said, the industry was more likely to “sacrifice the sales level of 2012” as Europe tightened its belt further to deal with the debt crisis. Da Silva predicted that carmakers in Europe would begin to trim vehicle production as early as this month, and he predicted a reduction of 175,000 units so as to lower vehicle inventories for the start of 2012.
But while Da Silva saw no room for incentives to propel the sector, his view of the outcomes from the current crisis was also less dire than Baldissara’s. He predicted that politicians would eventually get to grips with the problem and the impact was unlikely to be anything similar to the 30-40% drop in demand seen in 2008-09. Rather, he said, Europe was more likely to suffer from a protracted stagnation in vehicle sales and be “the market with flattest outlook for growth in the world”.
Passenger car sales in Western Europe, for example, are expected to be around 14m units this year, dipping slightly in 2012, and are not expected to return to the pre-crisis levels of 16m per annum until around 2016, according to Da Silva.
While there was consensus at the event between both the ECG and carmaker that current capacity levels are sufficient to meet demand, Baldissara expressed concerned that the vehicle logistics sector would not be able to sustain or invest further in capacity levels given any further shocks to sector. He pointed out that after the Lehman Brothers collapse, 20% of the car carrying capacity of the sector was slashed almost overnight.
“Since then, margins have been so squeezed that our members have had neither the money nor the inclination to invest in fleet renewal,” he said. He called on European carmakers to back renewed incentives and work more closely with their LSPs if they didn’t want to risk entering an eventual upturn without the ability to get cars to market.
Representatives from Toyota, Daimler, Renault-Nissan and GM were all present at the conference and there were some positive responses to call for working more closely together. Toyota Europe's logistics chief, Levent Yuksel, went so far as to say that Toyota wanted to "inspire and be inspired" in working with LSPs to seek a better way forward.
Daimler’s Christ described cooperation between carmakers and logistics providers as “the transmission fluid in the gearbox for more flexibility in transport”.
An initial working group session between representatives of ECG and the carmaker group ACEA has been scheduled for December 14th to address issues in non-competitive areas such as eliminating waste and improving efficiency. “It is the right step into the future,” Christ said, “and hopefully it will provide good solutions for all of us.”