FRANKFURT - German auto demand will rise modestly this year, helped by improving conditions in Europe's biggest economy and a raft of new models, the country's VDA auto industry association said on Thursday.
After three years of declining car registrations in Germany, the second half of 2003 showed signs of stabilization with overall sales for the year coming out roughly flat.
"2004 will bring a silver lining to the auto cloud, even if it will be paler than we would have liked," VDA President Bernd Gottschalk said at the organization's annual press conference.
"It will be a better car year, but it is still too early to say it will be a good one," he added, repeating an earlier prediction of 3.35 million new auto registrations for this year, up 3 percent from 2003.
He noted that the hoped-for turnaround in January had not transpired, although he gave no figures.
Germany's car industry, which employs one in five Germans and accounts for around 10 percent of industrial output, was plagued by weak domestic demand last year when the economy shrank for the first time in a decade.
VDA also said German car exports reached a record 3.67 million autos last year and that the strong euro against the dollar had so far had no substantial impact.
"Once again it was exports which were the auto industry's most stable pillar and helped us to grow despite a stagnant domestic market," VDA President Bernd Gottschalk said in a statement. He anticipates auto exports will remain "at a high level" this year, but declined to give a specific forecast.
The recent surge of the euro against the U.S. dollar has been a concern for German carmakers, who export more than 20 percent of their vehicles to the United States, and continued appreciation of the euro may pose a bigger problem.
"It will become problematic if the dollar-euro exchange rate settles at a very low level in the long term," said the VDA.
Most carmakers' profits are protected for the next year or so through hedging policies, but these transactions become expensive in the longer term.
Elsewhere in Europe, manufacturers are also battling weak demand with persistent worries over high unemployment capping consumer confidence in France, where car sales fell sharply last year.
In western Europe as a whole, car sales slipped 1.3 percent in 2003 with Japanese and Korean carmakers stealing market share from domestic players.
German manufacturers are launching an unprecedented number of volume new models, including Volkswagen's new Golf and Opel's Astra which they hope will entice consumers back into showrooms.