This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2013/01/30/business/global/french-automakers-biggest-problem-french-consumers.html

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
French Automakers’ Biggest Problem? French Consumers French Automakers’ Biggest Problem? French Consumers
(about 3 hours later)
PARIS — Shoppers at the Citroën showroom on the Champs-Élysées were conspicuous mostly by their absence on a recent weekday. Earnest-looking employees outnumbered the lone visitor by at least 10 to 1. Two of the workers were busy refining their already considerable skills at an auto-racing video game. PARIS — Shoppers at the Citroën showroom on the Champs-Élysées were conspicuous mostly by their absence on a recent weekday. Earnest-looking employees outnumbered the lone visitor by at least 10 to 1.
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. Two of the workers were busy refining their already considerable skills at an auto-racing video game.
The dormant French dealerships signify the main problem facing this country’s auto industry: Consumers in France do not seem very interested in French cars. Or any cars at all, in many cases. 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.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 look at switching to a German model: a Volkswagen, a BMW or a Mercedes. 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.” 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 in 2012, 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. 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.
Consumers’ flagging appetite 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 identified the sector as a strategic priority, and plays an active role in — some might say actively meddles in — the industry’s affairs. 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 onset of the global financial crisis that merged into the current euro zone economic slump, the overall European market peaked at just under 16 million newly registered vehicles. Last year, the figure had fallen to just over 12 million, according to the European Automobile Manufacturers’ Association. 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 ultimately 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. 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. 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.
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.
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 was the case just 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.
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 trend-setting 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.”“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.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.
“There appears to be a change in priorities for this generation,” Mr. Houchois said. “Maybe they’d rather buy a plane ticket for a vacation in Australia than buy a car.”“There appears to be a change in priorities for this generation,” Mr. Houchois said. “Maybe they’d rather buy a plane ticket for a vacation in Australia than buy a car.”
It is not hard to see why young people would have their doubts about the merits of car ownership. It is not hard to see why young people would have their doubts about the merits of car ownership. For a start, operating a car is an expensive proposition: Gasoline goes for the euro per liter equivalent of about $7.65 a gallon in France, according to the Economy Ministry, more than double the $3.30-a-gallon average the Energy Information Administration reported for the United States in mid-January.
For a start, operating a car is an expensive proposition here: Gasoline goes for the euro per liter equivalent of about $7.65 a gallon in France, according to the Economy Ministry, more than double the $3.30-a-gallon average the Energy Information Administration reported for the United States in mid-January. And unlike the United States, where driver’s education classes are often an inexpensive part of the high school curriculum, simply obtaining a driver’s license is a major obstacle. In France, there is a minimum cost of more than $1,600 for classes needed to prepare for the written exam and the even more difficult driving test. Nearly 1.4 million people take the French licensing tests each year, but only 57 percent pass; those who fail often spend thousands more preparing for a retest.
And unlike the United States, where driver’s education classes are often an inexpensive part of the high school curriculum, simply obtaining a driver’s license is a major obstacle for many Europeans. In France, there is a minimum cost of €1,200 for classes needed to prepare for the written exam and the even more difficult driving test. Nearly 1.4 million people take the French licensing tests each year, but only 57 percent pass; those who fail often spend thousands more preparing for a retest.
Julie Mora, 24, a grocery store cashier, said she would like to have a car to travel around the Essonne suburbs south of Paris where she lives, but has no opportunity to prepare for the licensing exam. “I work almost every day as it is,” she said, “so it’s practically impossible to set aside the time for the classes.”Julie Mora, 24, a grocery store cashier, said she would like to have a car to travel around the Essonne suburbs south of Paris where she lives, but has no opportunity to prepare for the licensing exam. “I work almost every day as it is,” she said, “so it’s practically impossible to set aside the time for the classes.”
But Ms. Mora said she could wait. “For my generation, a car and a smartphone are about equally desirable,” she said, “and I already have a phone.”But Ms. Mora said she could wait. “For my generation, a car and a smartphone are about equally desirable,” she said, “and I already have a phone.”
French automakers may also face the kind of buyer skepticism American car companies encountered a generation or two ago, when domestic consumers often felt the choice came down to buying the best car — meaning a foreign one — or supporting their compatriots’ jobs.French automakers may also face the kind of buyer skepticism American car companies encountered a generation or two ago, when domestic consumers often felt the choice came down to buying the best car — meaning a foreign one — or supporting their compatriots’ jobs.
But Mr. Houchois, at UBS, said the difference in performance between carmakers, at least at the market-entry level, had declined substantially, to the point that other factors, like brand cachet and financing, were more the determining factors. But Mr. Houchois at UBS said the difference in performance between carmakers, at least at the market-entry level, had declined substantially, to the point that other factors, like brand cachet and financing, were more the determining factors.
He noted that French buyers looking at three similar and similarly priced cars — a Peugeot 308, a Renault Mégane and a Volkswagen Golf — would probably find that they could finance the Golf at better terms, because of the German maker’s stronger balance sheet. That, Mr. Houchois said, was enough to make the decision for many wavering buyers. He noted that French buyers looking at three similar and similarly priced cars — a Peugeot 308, a Renault Mégane and a Volkswagen Golf — would probably find that they could finance the Golf at better terms, because of the German maker’s stronger balance sheet. That, Mr. Houchois said, was enough to make the decision for many.
By other measures, the French carmakers may still have some ground to make up. J.D. Power, the customer-satisfaction auto research firm, does not survey French car buyers directly. But its studies of buyer preferences in the German and British markets show both major French automakers ranking below-average in owner satisfaction. By other measures, the French carmakers may still have some ground to make up. J. D. Power, the customer-satisfaction auto research firm, does not survey French car buyers directly. But its studies of buyer preferences in the German and British markets show both major French automakers ranking below-average in owner satisfaction.
In any case, VW is not waiting to ease up on the accelerator in France. The German company is aggressively aiming for French customers, and is said to be considering taking over the large Champs-Élysées retailing space being vacated by Virgin Megastore for its own high-visibility showroom. Volkswagen’s premier Paris showroom is currently in the Seventh Arrondissement, far from the teeming multitudes. In any case, VW is not waiting to ease up in France. The German company is aggressively aiming for French customers. Mr. Houchois said French automakers needed to recognize that the current business model was simply no longer working.
Mr. Houchois said French automakers needed to recognize that the current business model was simply no longer working. One approach, he said, might be more emphasis on the U.S. “Zipcar model” of car-sharing, or other shared-ownership arrangements, rather than sales to individuals. Such services are still at the fledgling stage in France. One approach, he said, might be more emphasis on the American Zipcar rental model of car-sharing, or other shared-ownership arrangements, rather than sales to individuals. Such services are still at the fledgling stage in France.
“But the French carmakers, all the European actors, should plan their turnarounds on the assumption of no growth,” Mr. Houchois said. “It’s hard to make a case for growth in Europe.” “But the French carmakers, all the European actors, should plan their turnarounds on the assumption of no growth,” Mr. Houchois said.
“It’s hard to make a case for growth in Europe.”