French Automakers’ Biggest Problem Is the French Consumer

Two of the workers were busy refining their already considerable skills at an auto-racing video game.

Down the avenue at the Renault showroom, business was hardly brisker.

Only at the nearby Mercedes-Benz showroom, displaying German automotive arts, was there much sign of life.

The dormant French dealerships signify the main problem facing the country’s auto industry: Consumers in France do not seem very interested in French cars. Or any cars at all, in many cases.

In France, vehicle sales last year were the lowest in 15 years, falling below 1.9 million from a 2009 peak of 2.3 million, according to Georges Dieng, an analyst at Natixis Securities. And even those who are prospective buyers often prefer non-French makes.

Esther Cintract, 40, a banker who takes the Métro to commute into Paris, owns a 10-year-old Citroën. For her next car, she said, she would consider switching to a German model: a Volkswagen, a BMW or a Mercedes.

But many younger French people have other priorities. “I’ve never had a car,” said Jean-Victor Mareschal, 30, who works at a bookstore in Paris. “I don’t need one. I ride a bike, walk or take the Métro.”

In contrast to the United States, where carmakers had a bumper year, France’s 2012 sales fell by 13.9 percent, outpacing the 8.2 percent decline in the overall European market, according to the European Automobile Manufacturers’ Association. Industry officials expect another gloomy year in 2013.

The flagging appetite of consumers is a significant economic problem for France. Its auto industry, dominated by Citroën’s parent, PSA Peugeot Citroën, and Renault, directly employs about 220,000 people; thousands more jobs depend on it indirectly. The government, which owns a 15 percent stake in Renault, has called the sector a strategic priority, and plays an active role — some might say actively meddles — in the industry’s affairs.

The downturn is not France’s alone. In 2007, before the global financial crisis, the overall European market peaked at just under 16 million newly registered passenger vehicles. Last year, the figure had fallen to just over 12 million, according to the European Automobile Manufacturers’ Association.

Wherever the market bottoms out, French automakers, like many European manufacturers, have more factory capacity and workers than they can profitably use. And that may be the case for years to come — especially in France, where the job-cutting plans announced so far by Renault and PSA Peugeot Citroën have been criticized by many analysts as insufficiently daring, even as they encounter fierce resistance from workers and, in some cases, government officials.

But it is a showdown that appears to be increasingly unrelated to the French market’s demands. Philippe Houchois, head of European auto industry research at UBS in London, noted that most vehicle purchases in the developed world over the last five years had been to replace older cars, with only 2 percent of car sales in the United States and Europe representing net additions to those regions’ consumer fleets. In emerging markets, by contrast, 70 percent of new-car sales represented additions to the total stock, Mr. Houchois said.

But even replacement demand is under threat in Europe. As the population ages, car owners drive less, reducing wear on their vehicles. And today’s cars last much longer than they did a few decades ago.

Generational change also bodes ill for the industry. Carmakers can be confident that many of those who adopt the car-based lifestyle early will stick with it for life. But the younger customers the industry covets are less interested in driving than they used to be — particularly, it seems, in France and especially in trendsetting Paris.

“In my parents’ generation, pretty much everyone drives,” said Mr. Mareschal, the bookstore employee. “With my generation, it’s a lot less important. I’m not anti-car, but it’s something I just don’t care about.”

Being able to go without a car may seem like a luxury available mainly to city dwellers, but even outside the cities, interest in auto ownership seems to have flagged.

Article source: http://www.nytimes.com/2013/01/30/business/global/french-automakers-biggest-problem-french-consumers.html?partner=rss&emc=rss