Car industry facing difficult year in 2010

Hamburg - With most tax incentives for new cars expiring this year, analysts expect a sharp downturn in the industry for 2010 but it could also turn out to be the best time for private customers with a glut of used cars on the market. According to figures released by the German car industry federation (VDA), new car sales in Germany and France were particularly high because of the tax incentives. Sales in China were up four per cent and also up two per cent in India compared to the same period last year.

But sales in the United States were down 38 per cent to 2.2 million vehicles and in Japan sales dropped by 23 per cent.

The head of the German Institute for Automobile Manufacturing (IFA) Willi Dietz expects sales in Germany to fall from 3.6 million to 2.6 million next year, resulting in a dramatic cutback of the workforce.

Dietz predicts that only about 6,000 of the current 11,000 car dealers in Germany will remain in business by the year 2015. The trend in the United States, France and other countries is much the same.

Premium car makers such as BMW, Mercedes and Audi are having particular problems selling their cars. Mercedes sales in the United States are down by a third. Most customers in the new car market are from business but these are are cutting costs,

especially on management incentives such as company cars.

The tax incentives on new cars, offered by governments in France, Germany, Britain and the US, have been beneficial to manufacturers of cheap small cars that can be afforded by the man in the street.

According to a recent study conducted by Carfax Europe, a web- based service that supplies vehicle history reports to individuals and businesses on used cars and light trucks, the used car market in Europe alone has a potential of up to 40 billion euros (57 billion dollars).

At the same time the study pinpointed the biggest obstacle in the sector as the lack of trust customers have in used car dealers and in the condition of the vehicles offered.

Nevertheless most private consumers buy a used car and the opportunities have never been better. Overcapacity on the part of producers has flooded the market with low-mileage vehicles, especially from the leasing business. These cars are almost as good as new and technically in a much better condition than the used car of a few years ago.

The internet has stepped up competition with customers getting a good idea online on quality and condition. Numerous websites cater for buyers and sellers. General Motors has just started selling its cars on Ebay. Consumers have direct contact with 225 dealers in California.

The site provides comparison pricing across dealerships with helpful tips for buyers and trade-in values. The programme is running for a trial period until September but could well change the car market as we know it.