European car manufacturers suffer a major hit to profits

Another year of decline in car sales is expected. There are several reasons. First, a recession is looming and inflation is eroding consumer confidence. Second, the unrest and conflicts around the world are also undermining buyers’ desire to obtain a new car.

European car manufacturers suffer a major hit to profits

What may seem like a small drop in sales turns out to be a big hit to profits. Sales forecasts for Western Europe are declining dynamically. Investment bank UBS is forecasting a 1.4% drop in sales this year — to 12.3 million cars and SUVs sold. A further 2.6% reduction is expected next year.

US company AutoForecast Solutions also sums up the worsening conditions. “Markets around the world are trying to fight the expected downturn. With global inflation higher than economists would like, the slowdown in sales in many industries has heightened the threat of a recession. While the automotive sector in North America and Europe, especially in Eastern Europe, is already at a low level, a severe recession could hurt them even more,” AutoForecast Solutions said in an October report.

Fitch Solutions Country Risk & Industry Research reported that Europe as a whole will now be the worst-performing region in 2022, with sales falling by 10.8%, in big part due to the conflict in Ukraine.

UBS estimates a decline for all of Europe at -6.8% and 15.6 million vehicles and a recovery to -2.4% and 15.2 million vehicles next year. Western Europe includes all the major markets of Germany, France, Great Britain, Italy and Spain.