Italy Autos Report Q2 2008

Italy's new car market contracted during the first three months of the year after a solid performance in 2007. According to data from the European Automobile Manufacturers' Association ACEA, new car registrations totalled 2.49mn units last year, up by 7.1% year-on-year (y-o-y). However, as BMI shows in the latest Italy Automotives Report, crucial factors such as weaker consumer confidence have sapped car sales growth in 2008.

In line with data from the Italian carmakers' association ANFIA, new car sales totalled 212,326 units in March 2008, a significant fall of 18.8% on the same month a year earlier. During the period January- March, new car registrations amounted to 663,532 units, a fall of 10.01% y-o-y. The fall in new car sales in March has been attributed to weaker consumer confidence ahead of the country's general election in April, and expectations of a slowdown in economic growth. Indeed, sales have continued to fall despite the ongoing government incentives to car buyers to purchase less polluting vehicles. BMI expects domestic demand growth, in particular private consumption, to remain lacklustre in 2008, which could lead new car sales to fall further this year. Our full-year forecast for 2008 currently stands at 2.57mn units.

Key industry news this quarter relates to national giant Fiat. Fiat's results for 2007 exceeded expectations and the carmaker has maintained its lead on the Italian new car market in 2008. Fiat has reported a significant increase in turnover and profits for 2007 thanks to its cost-cutting programme and strong product portfolio, which includes popular models such as the Punto and Panda. Total sales rose by 12.9% y-o-y to EUR58.53bn. Operating results amounted to EUR3.23bn, up from EUR1.95bn a year earlier, while profits totalled EUR1.95bn, up from EUR1.065bn in 2006. In the fourth quarter of 2007, turnover reached EUR15.82bn against EUR13.86bn for the prior-year period. The auto division alone, which includes the brands Fiat, Alfa Romeo and Lancia, posted profits exceeding EUR7.2bn.

While Fiat is undoubtedly facing a challenging year in 2008 in its traditional markets in Western Europe, the carmaker continues to offset this by seeking growth in Latin America. In March 2008, Fiat's subsidiary in Argentina announced investment of US$300mn for its plant in Crdoba. According to industry sources, the carmaker will use around US$200mn to produce gear boxes, while the remainder will be used to raise output. Fiat resumed production at the Crdoba plant at the start of 2008 on the back of a US$60mn investment.