MILAN -- Italian car sales will probably shrink 6.6 percent in 2005, industry body Promotor said on Thursday, signalling another tough year for automakers battling for ground in a weak European market.
Italy, Europe's third-largest car market, has been buoyed this year by new launches from Fiat. But the next releases from the Turin-based carmaker, a wagon and a new version of the bestselling Punto, are not due until late 2005.
Promotor forecast Italians would buy about 2.1 million cars next year, while 2004 sales should total 2.25 million units, about the same as in 2003.
A withering Italian market is bad news for loss-mired Fiat, which is struggling to revive its car sales and relies on its home country for about 46 percent of them.
Its recovery has been hampered by a fierce battle between car companies to lure customers with incentives ranging from financing deals to free features on new cars -- offers that Fiat can little afford as it strives to improve its profit margins.
Promotor said such incentives could wane next year.
"Car production costs have jumped recently due to strong rises in the cost of base materials. In this market they cannot pass on those costs to the customer so they may try to save money by reducing promotional deals," it said.
Carmakers including Renault and GM Europe have predicted European car sales will be flat in 2005 after a rise of around 1.1 percent so far this year.
Despite an 18 percent jump in French car sales last month and a 13.4 percent climb in Spain, Europe is still a tough battlefield, with consumer confidence shaky, the economy still struggling to grow and export-reliant firms despondent about the weak dollar.
"It's a little bit early to start saying car demand is improving on the basis of one month's trend. Until November the trend had been horrendous," said Harald Hendrikse, an auto analyst at Credit Suisse First Boston.
"You have got consumer confidence down in France. Germany is an absolute disaster. Jobless rates are going up. All of that tells me that car sales are not going up," he added.
Italian car registration data for November is due out on Friday. On Tuesday, an industry source said sales slipped slightly on November 2003 and Fiat's market share had shrunk to 27.4-27.5 percent, its second-worse performance this year.