Why the shape of Europe's recession matters

Luca Ciferri is senior reporter at Automotive News Europe.
What's the difference between a V- and W-shaped recession in Europe?

About 1.7 million sales, according to market researchers.

J.D. Power Automotive Forecasting's base prediction is that western Europe new-car sales will decline 170,000 units – or 1.4 percent – in 2011 to 12.56 million from the 12.73 million forecast for this year, which is off 7 percent from 2009.

That prediction gets tossed out the window if one of the recession scenarios becomes a reality.

Of the two, the V-shaped option is the best for automakers.

“In the unlikely event of a V-shaped recovery, the market could be around a million units higher than the base forecast,” said Jonathon Poskitt, European sales forecast manager at J.D. Power.

Since we already hit the V's low point, ideally what would come next is a fast and steep rise as the economy improves.

Unfortunately, there are no signs that such a positive rebound it imminent.

The W-shaped recession is also known as a double-dip recession.

Call it what you want, the result is ugly: After an initial rise the economy drops sharply, creating a W-shaped diagram.

A double-dip recession certainly cannot be overlooked, said Poskitt, who believes that such an event would erase about 700,000 units from the 2011 base forecast.

We know that year-on-year unit sales will be down for the rest of this year and for the first quarter of 2011. This is because the 2009 volume numbers were inflated by scrapping schemes in the major European markets.

Regardless of what shape the recession takes, western Europe's auto industry faces a tough end to 2010 – and a bumpy start to 2011.