Export to Europe!

Published: 27 Jul 2009 18:44:14 PST

Europe should be your main target market for parts exports. Here is why.

I just returned from a trip to Europe. What a difference it was from traveling to the USA. In the USA, all you see is sad faces, if you see any faces at all: Many companies, from small dealers to large parts companies, have closed.

In Europe, you see happy faces and sad faces, depending on where you look and who you are talking to.

In terms of auto sales, Europe as a whole appears to have turned the corner. For the month of June, Europe recorded a modest growth of 2.4 percent, mostly “carried by the effects of fleet renewal schemes in more than 10 EU Member States.”

“Fleet renewal schemes” is a EUphemism for cash for clunkers. In many countries in Europe, the government gives money to people who retire their old car and buy new. Germany gives 2500 Euros to its citizens. This huge stimulus boosted Germany’s sales. Twice in a row, Germany registered increases of 40 percent over the same month in the prior year. Instead of 3 million cars last year, Germany expects to sell anywhere between 3.6 million and 3.8 million new cars this year.

The big winners in Europe’s turn-around are the Volkswagen Group (+9.5 percent), Fiat (+11.7 percent), and Hyundai (+27.1 percent). In terms of market share, the Volkswagen Group dominates Europe with 21.4 percent share, followed by PSA (13.1 percent), Ford (10 percent), GM Group (9.1percent), and Fiat (8.6 percent). Volkswagen and Fiat are expected to gain market share, GM Group is expected to lose.

Not all is rosy in Europe. Germany for instance usually exports half of the cars it makes. Europe’s car manufacturers are hurt by the worldwide sales slump. In the first quarter of 2009, Europe’s car production was down by 35 percent.

In the after sales field, Europe is buffeted by good news and bad news. Drops in sales of new cars usually result in increased after sales, as customers have their cars repaired instead of buying new ones. The cash for clunker schemes resulted in the sudden retirement of older cars. This affects mostly small cars. Many parts in these cars are being recycled, remanufactured, or sold used.

Overstocks from OEM production, or from bankruptcy sales, are disrupting the market. Car manufacturers react and drastically slash the prices of certain commodity parts (the ones which are exposed to cutthroat competition.) Sometimes, dealers who buy 10 pieces, get 4 pieces free. Certain parts which are under competitive pressure are sold to dealers at 15 percent to 25 percent of list. We have seen some parts which are sold from European wholesalers to dealers at prices which are below ex works prices in China.

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