Green cars could kick-start stalled motor industry

Glitz and bling tarnished by the downturn and a succession of grim sales statistics
David Gow
guardian.co.uk, Monday 2 March 2009 17.53 GMT

A man climbs out of an iChange, built by Swiss carmaker Rinspeed, at the 79th Geneva Car Show. The car changes shape to accommodate different numbers of people. Photograph: Arnd Wiegmann/Reuters
Japan today reported a 32% collapse in car sales in February – the worst decline since 1974 – and sales slumped in Spain by 48% highlighting the dire state of ­global carmaking on the eve of the Geneva motor show.
Carmakers are experiencing the worst slump in sales for 35 to 50 years, millions of jobs are under threat, several companies could go out of business and dozens of plants will close for ever. Tomorrow the 79th Geneva motor show, traditionally one of the world's biggest and most sumptuous, will showcase an industry starved of credit and customers. Normally an occasion for glitz and bling, for irrationally exuberant launches and parties, it will be leaner – and greener – than usual. Japan, home of the world's biggest car-maker Toyota, as well as Honda and Nissan and the like, reported a 32.4% collapse in car sales in February - on top of a 28% drop in January and the worst decline since 1974.
Spain, once one of the western Europe's fastest-growing economies and markets, saw sales fall 48.4% - close to the record 49.6% slide last November and coming after a "mere" 41.6% in January. The socialist government's "scrappage" scheme, paying drivers €1,500 each to trade in their elderly bangers for new, fuel-efficient models, ain't is not working - yet.
"Consumers continue to shy away in the face of an economic slump," said Kentaro Nakata of the Japanese car dealers' association. "Auto demand remains depressed and it is very difficult to predict an upturn in the market right now."
He could have been speaking for the global industry which, according to ­Carlos Ghosn, chief executive of Renault and ­Nissan and president of the ­European auto-manufacturers' association ACEA, expects sales of just 55m, perhaps even 50m, this year – compared with the expected pre-recession demand of 70m and capacity of 94m. India's Tata, owner of Jaguar Land Rover, today revealed its sales declined by 15%.
Only three months ago, Wendelin Wiedeking, Porsche's chief executive, arrogantly dismissed the clamour of European and US rivals for state bail-outs as he reported profits far exceeding sales. However, todayit announced first-half sales tumbled 27%, with revenues down nearly 13% as rich consumers boycott conspicuous consumption and sacked bankers hoard their shrunken bonuses.
Environmental focus
Undisclosed pre-tax profits at the ­luxury sports-car maker were up – thanks to stock options trading in Volkswagen, where Porsche has acquired a majority and initially planned to raise it to 75% this year. Volkswagen, Europe's biggest carmaker, warned that its profits and sales this year would decline, but insisted it would boost its overall global market share. The ­German group refused to give a precise forecast after reporting record revenues and earnings for 2008 in a ­surprise announcement. However, elsewhere in the industry, the figures are deep red and are threatening to deteriorate as firms such as General Motors, Chrysler and the rest run out of cash.
On a more optimistic note, in Brussels, the European commission (EC) today waved through Italian and Spanish plans to bail out their respective auto industries after securing commitments that they would be non-discriminatory and remain within the hallowed internal market rules.
And, in Paris, Peugeot Citroënsaid it would accelerate a joint venture with Japan's Mitsubishi to launch electric cars on Europe's roads by late 2010. It is already bidding to provide La Poste with 500 electric vans and working with power group EDF on a plug-in hybrid capable of running on batteries for 50km.
This year's motor show will be centred on the environment. "There will be a green focus. It will be a welcome diversion from the financial crisis," said analyst Rebecca Wright of Global Insight. But, amid all the new green models on display, there will still be room among the 85 planned launches for high-performance Bentleys and Bugattis.
The industry's problems could lead to a re-drawing of the ownership structure worldwide with a radical move to shrink capacity. The European commission reckons the European industry is ­saddled with 20% over-capacity that needs to be stripped out in time for the recovery.
General Motors' Europe plan set out last Friday to save Opel and Britain's Vauxhall relies heavily on €3.3bn (£2.9bn) of government aid, including from Britain. Karl-Theodor zu Guttenberg, Germany's federal economics minister, indicated Berlin was in no hurry to oblige.
The plan requires €3bn from parent GM and €1.2bn of savings as well as ­private investors stumping up 25% to 50% of new capital and will almost inevitably see one or more of the plants close.
Brussels says the long-term global outlook is "promising", exponential demand in emerging markets and the imperative of a "greener" fleet bringing new opportunities. But, in the next few days, executives will warn that it could take years for China, India and the rest to recover, and reduced budgets for investment and R&D will put back the "greening" of the ­industry and make EU targets for cutting emissions to less than 120g a kilometre unreachable.