EY - Close-up of the Tire on a Car

The Eurozone and the automotive sector

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The risk of the Eurozone breakup may have been averted, but the Eurozone crisis continues to add pressure across the automotive value chain. Vehicle sales are declining, manufacturers face intense price-based competition, and dealers and suppliers may be at risk for insolvency.

Consider these facts:

  • The unemployment rate of 15- to 24-year-olds in the Eurozone is 24%. This means that the number of first-time car buyers is likely to decline.
  • Capacity utilization by carmakers in Europe was 65% in 2012 – down from more than 80% in 2007-08.
  • Analysts expect 2013 new vehicle sales in Western Europe to drop to 1993 levels. In Q1 2013, the UK was the only major market with an increase in new car registrations (7.4%). Other major markets, such as Germany, France, Spain and Italy, registered a double-digit decline.

Our Global Automotive Center analyzed the severity and impact of the Eurozone crisis on the automotive value chain, including vehicle manufacturers, suppliers, dealers and financial services.

To manage overcapacity and tackle a high fixed cost structure, we found that the automotive sector has adopted multiple strategies, including:

Responding to the Eurozone crisis

EY - Responding to the Eurozone crisis

  • Plant closures
  • Layoffs
  • Divestitures
  • Shift reductions at plants
  • Temporary shutdowns
  • Labor agreement negotiations

So what can companies across the automotive value chain do to wade through the crisis?The chart "Responding to the Eurozone crisis" highlights the challenges and some key considerations.

Responding to the Eurozone crisis

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Sources: Dealogic Completed Transactions from October 2012 through
March 2013.European Commission Flash Consumar Confidence Indicator for
EU and Euro Area for May 2013

To learn more, download the PDF.

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