Europe's version of cash for clunkers has minimized the drop in sales this year, but trouble may lie ahead as the incentives run out, a London analyst says.
IHS Global Insight's Nigel Griffiths says so-called scrappage programs offered this year in several large countries will limit the western European sales decline to about 2 percent.
"They have worked amazingly well to limit losses this year," Griffiths says. "But there will be a much bigger drop next year because most run out at year end. Most of the falloff in 2010 will be concentrated in the first half."
Global Insight forecasts that sales in 28 European markets will drop 4 percent to 14.2 million units this year and 9 percent to 12.9 million units in 2010.
In October, European sales rose 11 percent to 1.3 million units. But that compares with poor sales in October 2008, according to ACEA, the European automakers' association. For the first 10 months this year, sales are off 5 percent at 12.2 million.
The scrappage incentives, which provide cash to those trading in old models for new, have helped bargain hunters buying inexpensive models.
Small-car specialist Fiat is the only top 10 automaker to boost sales this year, up 4 percent. Bargain brands Hyundai, Kia, Suzuki, Dacia and Chevrolet are up a combined 10 percent this year.
But with corporate fleet sales down 20 percent, Griffiths says, luxury brands have plunged.
Through 10 months, combined retail and fleet sales for Audi, Mercedes, BMW, Volvo, Jaguar and Land Rover fell an average of 15 percent.
"But that will reverse next year," Griffiths says. "We see company cars gaining, which helps the big brands, and budget brands falling without incentives."