Saturday, August 17, 2013

French Automakers’ Biggest Problem? French Consumers

Shoppers at the Citroën showroom on the Champs-Élysées were conspicuous mostly by their absence on a recent weekday
wrote David Jolly some time ago in the New York Times.
Earnest-looking employees outnumbered the lone visitor by at least 10 to 1.

 … Down the avenue at the Renault showroom, business was hardly brisker. 

Only at the nearby Mercedes-Benz showroom, displaying German automotive arts, was there much sign of life. 

The dormant French dealerships signify the main problem facing the country’s auto industry: Consumers in France do not seem very interested in French cars. Or any cars at all, in many cases.
In France, vehicle sales last year were the lowest in 15 years, falling below 1.9 million from a 2009 peak of 2.3 million, according to Georges Dieng, an analyst at Natixis Securities. And even those who are prospective buyers often prefer non-French makes. 

 … In contrast to the United States, where carmakers had a bumper year,    France’s 2012 sales fell by 13.9 percent, outpacing the 8.2 percent decline in the overall European market, according to the European Automobile Manufacturers’ Association. Industry officials expect another gloomy year in 2013. 

 … The flagging appetite of consumers is a significant economic problem for France. Its auto industry, dominated by Citroën’s parent, PSA Peugeot Citroën, and Renault, directly employs about 220,000 people; thousands more jobs depend on it indirectly. The government, which owns a 15 percent stake in Renault, has called the sector a strategic priority, and plays an active role — some might say actively meddles — in the industry’s affairs

The downturn is not France’s alone. In 2007, before the global financial crisis, the overall European market peaked at just under 16 million newly registered passenger vehicles. Last year, the figure had fallen to just over 12 million, according to the European Automobile Manufacturers’ Association. 

Wherever the market bottoms out, French automakers, like many European manufacturers, have more factory capacity and workers than they can profitably use. And that may be the case for years to come — especially in France, where the job-cutting plans announced so far by Renault and PSA Peugeot Citroën have been criticized by many analysts as insufficiently daring, even as they encounter fierce resistance from workers and, in some cases, government officials

 … It is not hard to see why young people would have their doubts about the merits of car ownership. For a start, operating a car is an expensive proposition: Gasoline goes for the euro per liter equivalent of about $7.65 a gallon in France, according to the Economy Ministry, more than double the $3.30-a-gallon average the Energy Information Administration reported for the United States in mid-January.

And unlike the United States, where driver’s education classes are often an inexpensive part of the high school curriculum, simply obtaining a driver’s license is a major obstacle. In France, there is a minimum cost of more than $1,600 for classes needed to prepare for the written exam and the even more difficult driving test. Nearly 1.4 million people take the French licensing tests each year, but only 57 percent pass; those who fail often spend thousands more preparing for a retest.