April

TRAINING EXECUTIVE

EXECUTIVE BUSINESS SIMULATION

MARKET RESEARCH MARKET RESEARCH PACKAGE FOR THE EUROPEAN PASSENGER AUTOMOTIVE INDUSTRY

2009-2010

Release 9

MARKET RESEARCH
MARKET RESEARCH PACKAGE FOR THE EUROPEAN CAR INDUSTRY

THE EUROPEAN CAR MARKET The European motor industry is the world's largest car market, having exceeded the US market in total units sold (excluding light trucks). It is also an extremely competitive arena. Some of the patterns to emerge from this market over the last few years are listed below. 1. Sales Figures1

Historical and Current The last strong rise in sales was in 1998 (14.3m), continuing into 1999, however, in 2000 sales fell by 2.2% (14.7m) and stayed at this level in 2001. In 2002 sales fell by 3%, 2003 saw an increase of nearly 5% but this was a result of an expanding marketplace, in reality there was another fall of 1% when comparing sales in the same EU member countries. 2004 saw a genuine 2% increase in registrations, remained stable in 2005, showed a substantial 4% rise in 2006 but then the percentage increase dropped to 1% in 2007. In 2008 European car sales figures were easily the worst for over a decade: 14.6m in extended Europe, 13.6m in the core economies, a drop of 8.2% and 8.1% respectively over 2007 figures. Gloomy forecasts for 2009 proved to be well founded with the whole market falling by a further 0.7% to 14.5m, however, the market excluding the new EU countries did show a 0.7% improvement to 13.7m. The worst hit regions were Central and Eastern Europe (CEE) where the market fell by 28.1%. Russia, which is not included in the European figures, but is relevant as an emerging market, saw a massive 49% drop. However, in general, the results were not as bad as expected, primarily as a result of the introduction of government scrapping incentive schemes in many European countries, including Germany, France, Austria, Spain, Italy and the UK. Manufacturer incentives also contributed to the relatively reasonable sales results given the economic crisis that prevailed in the region and in the UK the temporary lowering of VAT also had some positive impact. Within individual countries there was even some reason for hope as 2009 sales improved on 2008 figures in Germany (23.2%), France (12.3%), Austria (8.8%), Slovakia (6.7%) and Poland (0.1%). Results in Italy and the UK were also better than anticipated with the fall in sales limited to 0.1% and 6.4% respectively. These figures clearly reflect the success of the various incentive initiatives that operated in the majority of these countries. The first quarter of 2010 brought more optimism as 9.2% more cars were registered than in the same period in 2009. Within individual markets in Western Europe, only Germany recorded negative results (-22.8%), while France (+16.9%), Italy (+23.3%), the UK (+27.3%) and Spain (+44.5%) all posted growth. However, the CEE and Russia continued to experience severe falls, 12.4% in the former, with only the Czech Republic and Serbia recording any improvement. Most scrappage schemes ended by mid 2010 and the market is highly likely to weaken as a result. The figures for June have already shown a 6.4% year-on-year decrease and half year sales were down by 3.9% on 2009 figures. July figures reinforced the danger signs with an 18.5% fall in European sales and individual countries reporting heavy falls when compared to last year. Even in Russia where a scrappage scheme was put in place in March 2010, sales are expected to remain stagnant this year because of the administration involved and the lack of cheap credit. Forecast Ultimately, sales figures in 2010 will depend on European markets emerging from recession quickly so that consumer spending does not fall too sharply without the presence of incentives. With warnings that the recession could well return in a "double dip" environment does not bode particularly well for the industry.

1 Figures are approximate as they vary in different sources. In this document the majority are taken from the ACEA. All European figures are based on the EU countries + Iceland, Norway and Switzerland. They exclude Russia.
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It is predicted that it will be 2011 before there is any substantial revival in the car market.

2.

Pricing structures

Selling prices in Europe continue to be under pressure as manufacturers try to cope with over supply, the difficult economic climate and lack of consumer confidence. Tax differences and the expectation for panEuropean price standardisation have also been blamed. Over the past two years there has been a general trend to lower prices to attract the reduced number of buyers in the market. However, the UK market prices saw a sharp increase from some manufacturers in 2009, forced by a poor euro exchange rate with the pound. Manufacturers are having to choose between profitability and sales volume. One strategy being employed to keep prices at a sustainable level without jeopardising interest from consumers is to set official price lists at a realistic level rather than inflating prices to accommodate potential negotiation from individual customers. However, this may not be totally successful as many consumers will automatically still try to achieve a lower purchase price than that set by the manufacturer. Others are trying to plan for long-term cuts by implementing cost saving measures, e.g. Toyota is planning to reduce prices by 30% by 2013. 3. Mergers, takeovers, joint ventures and strategic alliances

After a very difficult economic period, most companies were back in profit by 1998/9 but the pressure of over supply created a series of mergers and takeovers, a move that had proved to be successful for PSA, the long standing partnership that was created in 1975 between Peugeot and Citroen. The biggest ever merger took place in 1998 between Daimler Benz and Chrysler. It had mixed fortunes but finally ended, following poor sales performance by Chrysler, with its sale to a private equity group in 2007, for one fifth of the price originally paid, Overall the company saw profits rise but only because of the growth within Daimler Benz. Post-sale, the companies were known as the Daimler Group and Chrysler Holding LLC. Daimler still held 19.9% of Chrysler which, in October 2008, it declared to have zero value. Chrysler is now owned by Fiat and Daimler is in the process of entering a strategic alliance with Renault-Nissan. Fiat stepped in to rescue Chrysler from bankruptcy in 2009. It took a large stake in the company, alongside US and Canadian government support and that of the automobile unions of US and Canada. The US private equity fund Cerberus Capital Management, who bought Chrysler from Daimler lost out in a major way with the bankruptcy of Chrysler. It is expected that Fiat will increase its stake in Chrysler to 35% within the next two years. It is speculated that Fiat may also be thinking long-term about a merger with PSA. In early 2010, talks between the French company and Mitsubishi about a potential stake swap were abandoned but should PSA still be looking for a financial agreement with another manufacturer then many believe that a merger with Fiat would be a perfect combination. The plan for the Renault-Nissan/Daimler venture is that the former will take a 3.1% stake in Daimler and the German manufacturer an identical stake in Renault-Nissan. Daimler will benefit from stronger competitiveness in the small and compact market and Renault-Nissan will gain expertise from the luxury market, both view the alliance as creating lasting value for the companies. All parties insist that brand identity will remain totally intact. The alliance between Renault and Nissan began in 1999 when Renault took an initial 36.8% stake in the lossmaking Nissan, increasing this to 44.4% in 2001 after profits had soared, at this time Nissan also strengthened the tie by investing 15% in Renault. Ironically in recent times it has been Nissan that has helped Renault through a difficult period. Despite Renault's sale of its 17.88% stake in the Nissan Diesel Motor Co. Ltd, the relationship continues to be strong and has been reinforced by their joint link with Daimler. Ford bought Volvo in 1999 and Land Rover from BMW in 2000, to add to the Jaguar and Aston Martin marques they already owned. However, the struggle to maintain profitability resulted in the company selling Aston Martin in March 2007 and then Jaguar and Land Rover to Tata Motors in 2008. It was also decided to sell Volvo in 2008 but it has taken until 2010 to find a buyer, a deal to sell the brand to the parent of Chinese motor manufacturer Geely Automobile is expected to be completed in the third quarter of 2010.

GM has been involved in a number of takeovers and mergers. In 2000 the company bought the rest of Saab Automotive (they already owned 50%). However, Saab continued to struggle and with the economic downturn of 2008, went in to a tail spin. Saab filed for "reorganisation" in Sweden (equivalent to Chapter 11 bankruptcy) in February 2009, hoping for a Government rescue, which did not materialize. It was finally bought by Dutch luxury car manufacturer Spyker with a Swedish Government backed loan, with GM retaining preferred shares worth US$326m. In 2002 GM purchased the bankrupt Daewoo and rebadged many models as Chevrolet in some markets, with some success. GM and Fiat formed a partnership in 2000 but this was dissolved in 2005 when GM refused to purchase the remaining 50% of Fiat, an option that the latter was allowed to enforce under the terms of the original agreement. GM argued that the clause had been invalidated by changes within the Italian company and after heavy dispute Fiat secured $2billion as a result of the breakdown, which provided the capital needed to build a more profitable future. In 2008 GM's position deteriorated dramatically, along with some other US car makers, notably Chrysler. Despite several attempts to arrange a deal for Magna, a Canadian autoparts maker, in conjunction with the Russian Sherbank and Gaz companies to purchase the GM European operations of Opel and Vauxhall, an about turn was announced by GM who withdrew from the discussions and opted to retain ownership of these two brands. Although mergers and takeovers of the big manufacturing companies has slowed considerably, the principal of companies working in alliance is playing an increasing part in car manufacture as companies try to improve profit margins and develop new markets. The approach is two-fold; the first one is where major manufacturers work together on named projects, sharing research and some production facilities (e.g. shared platforms), mainly still in Europe. The second is the formulation of joint ventures with companies in Eastern Europe and the Far East which has benefits for all concerned : the major manufacturers can use the existing production facilities and distribution networks in these countries, enabling them to break into emerging markets, and the local companies profit from the investment made in their companies. The downside for European workers is that in some cases leading manufacturers have moved production of a model from the domestic plant to one in "Eastern" Europe where overheads are lower, resulting in redundancies in the "Western" European factories. Examples of the two types of alliance are as follows. 3.1 Shared Research and Production Facilities

Since the end of the GM/Fiat partnership, the latter has been busy looking for project alliances with other companies. A joint venture has been signed with Tata for research and development and marketing, as well as future production and distribution of cars, and there are rumours of a possible alliance with MercedesBenz/Daimler. The company has also signed an agreement with China's Chery Automobile to jointly manufacture engines and for assembly and distribution of the Fiat, Alfa Romeo and Chery brands. Chrysler has also formed an alliance with Chery to develop, manufacture and distribute Chery-made small and sub-compact cars in North America, Europe and other major automotive markets under the Chrysler group brands. PSA and BMW currently collaborate on small engine programmes but the two automakers could expand their relationship to include platforms and parts sharing, most likely on the smaller models, including some BMW badged vehicles. BMW and Mercedes also share some components in a bid to reduce costs and this could eventually include engines and gearboxes. The former already collaborates with Daimler as a whole on a number of projects, including car parts and research in the field of hybrid drive. PSA is in discussion with Mitsubishi about the possibility of using the Japanese company's platform for small cars at it's new production facility in Thailand. The recent alliance between Renault-Nissan and Daimler is based on the two companies working together on the next generation of the Smart Fortwo and Renault Twingo, including electric versions, as well as on expanding the range of the two models. Product design will be very different but the engineering will be on the basis of jointly developed architecture. They will also share research and development of fuel-efficient diesel and gasoline engines, as well as adapting existing engines for each others car models.

3.2

Alliances for Production and Distribution of Cars in Eastern Europe and East Asia

India is one of the fastest growing markets in the world and all the major companies are looking for routes into the marketplace, forming an alliance with an Indian manufacturing company is seen as one of the most effective ways of doing so. The very first alliance was between Suzuki and Maruti in the 1980s and others have since followed. Honda Siel Cars India Ltd., (HSCI) was incorporated in December 1995 as a joint venture between Honda and the Indian company Siel Limited; the first manufacturing unit was opened in 1997 and a second facility was opened in 2008. Models produced comprise the Honda Jazz, City, Civic and Accord, the CR-V is imported from Japan as a completely built unit. HSCI is also preparing to launch new small cars designed specifically for the Indian market. Audi uses the Skoda Auto India company's production facilities to assemble the A6 for distribution within India; Toyota Kirloskar Motor (TKM) is an 89/11 joint venture between Toyota Motor Corporation and the Kirloskar Group, scheduled to open its second production facility in December 2010. As well as making the Corolla Altis, Innova and Fortuner in India, TKM also imports the Camry, Prado, Land Cruiser and Prius fully assembled. In 2005 Renault Nissan entered the marketplace via a partnership with Mahindra & Mahindra, the partnership was restructured in 2010, leaving M&M responsible for the management of one model in the Indian market. Renault will continue to support M&M and the product through a licence agreement and supply of key components, including the engine and transmission. In 2008 Renault-Nissan also signed a partnership with Bajaj Auto to develop a low cost vehicle for the Indian market, scheduled for launch in 2011. Operating from their newly opened independent plants in Chennai, both Renault Nissan and Ford are using 85% Indian parts for the vehicles produced there. Fiat has an agreement with Tata that will provide the opportunity to produce and distribute cars in India in the future. [Volkswagen, General Motors, Daimler, BMW and Hyundai all have independent plants in India and Peugeot has invested in a feasibility study for a possible re-entry into the country.] Alliances with companies in China include the joint venture between Toyota and Guangzhou Automobile Group for production and sales of the Yaris and the PSA agreements with the Dongfeng Motor Company and the Hafei Automobile Group, set up in an attempt to boost global sales for the French company. 4. The Internet

The internet is an extremely effective medium for car promotion with a steadily increasing level of sales. Although moving slowly, many industry observers still predict major changes in passenger car retailing because of the power and influence of the internet. Major companies continue to make changes in the structure of dealerships in anticipation of further advances and the websites are becoming increasingly sophisticated, allowing potential customers to explore the marketplace from their own homes. 5. Introduction of new non-European products

The Japanese manufacturers have had a key presence for many years and in 2008 Japanese brands took 14.3% of the European market share (14.6% in 2007, 14.2% in 2006 and 13.5% in 2005), selling 2.1m units. However, since 1998, the Korean car manufacturers have also made an increasingly important impact on the marketplace. Although sales levels stabilized between 2005 and 2008, the need for lower cost vehicles during economic difficulties boosted their sales in 2009, aided by the very attractive financial offers made to the consumer. The Japanese and Koreans continue to increase their investment in Europe as they strive to continue improving market share and the Chinese are also beginning to infiltrate the region. In 2005 Nanjing Automobile bought MG Rover and in 2007 the company was sold to the Shanghai Automotive Industry Corporation who continued to assemble cars under the MG name. The manufacturer Chery Automobile began exporting cars to Eastern Europe in 2007, with the aim of having a European plant within five years and the Indian manufacturer Tata is preparing to launch new models in Europe, strengthened by their ownership of Jaguar/Land Rover. Despite complaints from some US and European manufacturers that the Asian companies keep prices low by artificial currency control, governments are unlikely to intervene because, unlike their European and American counterparts, the Asian companies are currently investing heavily in Europe, providing locally produced vehicles and valuable sources of employment. US car makers are now also exporting to Europe in their bid for growth against a struggling home market. Chrysler has already had success overseas with the 300 series.

MANUFACTURERS' SALES DETAILS Most manufacturers experienced a dramatic fall in sales in Europe in 2008 and although some saw a slight improvement in 2009, figures were on the whole still well below 2007 levels. The only companies to see improvement in real terms and negate the falls of 2008 were : Company Renault Nissan Fiat Korean marques (combination of Daewoo, Hyundai & Kia) Increase in 2009 sales compared to 2008 5.8% 6.2% 18.2% Increase in 2009 sales compared to 2007 1.3% 0.3% 4.4%

All three had experienced falling sales in 2008 over 2007 but were able to restore the status quo and even make progress in 2009. In 2008 Renault Nissan sales were down 4.2% (7.6% increase in 2007 following a 3-year increasing slide of 2.5% in 2004, 4.9% in 2005 and 10.6% in 2006); Fiat sales fell by 5.6% but this came after a remarkable company turnaround involving an 11.7% improvement in sales in 2007 and a 17.9% increase in 2006 after several years of dropping figures; and, finally, the Korean marques fell by 11.7% in 2008 after a 5.6% rise in 2007. In 2009, the top selling company, Volkswagen, recovered by 0.9% on 2008 figures but sales were still down by 3.2% on 2007, this was in sharp contrast to the company's continuing sales improvement in previous years (6.5% increase in 2006, 8.4% increase in 2007). PSA, Ford and Suzuki also recovered by 1.2%, 3.3% and 0.2% respectively over 2008 figures but were still down 8%, 12.1% and 12.9% on 2007 sales. In 2007 PSA had experienced a year on year sales increase (5.5%) for the first time in five years, Ford reported an 8.3% increase following a small 0.2% rise in 2006 and Suzuki had its best performance in 2007 with an exceptional sales increase of 31.7%. BMW, GM, Toyota, Daimler, Honda and Mitsubishi continued to have falling sales figures in 2009. BMW sales fell by a further 13.7% following a drop of 3.5% in 2008 (8.5% increase in 2007); GM sales dropped by 9.1% on top of the 14.4% fall seen in 2008 (9.8% rise in 2007, 1.5% fall in 2006); Toyota sold 6.7% fewer cars in 2009 than in 2008 and 17.2% less in 2008 than 2007 (figures rose by 10.9% in 2007 and 11.6% in 2006 when it replaced GM as the top global car maker in terms of sales, a position GM had held for 81 years); Daimler's fortunes continued to spiral with a 13.3% fall in sales, following drops of 4.6% and10.3% in 2008 and 2007 respectively; Honda's sales fell by 7.8%, better than the 15% fall experienced in 2008 but negating the impressive 22.5% growth experienced in 2007; Mitsubishi also had disastrous sales figures, experiencing a fall of 17% in 2009 on top of the 15.1% fall of 2008 (14.3% increase in 2007). Mazda was an exception in 2008 in that sales actually increased by 1.8% but this could not be sustained and sales decreased by 13.7% in 2009, giving an overall drop of 12.1% over 2007 figures. As in the previous 3 years, VW was the top selling European car maker in 2009, followed by PSA and Renault Nissan, with Ford in fourth place. The unprecedented falls in sales can be attributed to the surge in fuel prices early in 2008 followed by the collapse of financial markets and general economic crisis. Some companies fared better than others but in such a turbulent environment sales alone are not an easy measure. Honda for instance shut down its factories until June 2009 but retained much of their workforce, albeit on reduced pay, rather than sell cars at massive discounts, while others maintained sales at painfully low prices and by offering expensive promotional offers. Any recovery in 2009 was attributed to Government scrappage schemes involving the provision of a cash sum to customers who traded in cars of a certain age for a new vehicle. The schemes were successful but now that they have ended in all countries except Russia, sales are once again going to be under severe pressure. (See page 1 for more details.) Prior to the crisis, the European car market had experienced a period of strong growth with companies launching a large number of new models with the aim of enticing consumers into purchasing new vehicles. It has to be hoped that this can be repeated, this time possibly relying on buyers wishing to move to more fuel efficient vehicles given current high fuel prices and increased taxation on larger cars. Much will depend on the timing of economic recovery and the ensuing revival in consumer confidence.
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PROFIT MARGINS Despite growth in sales for the majority, during the first five years of the decade nearly all companies have suffered from decreasing profits. 2005 began a turnaround for a few companies that continued into 2006 and 2007 but most crashed heavily in 2008/2009. The Fiat Automobile Division (excluding Maserati and Ferrari) had a remarkable turnaround of fortunes in 2006 when it achieved a EUR291m profit, following a loss of EUR281m in 2005. Phenomenal growth was experienced in 2007 when profits rose to EUR803m but performance could not be sustained in the unstable years of 2008 and 2009 and profits fell to EUR691m and EUR470m respectively. However, these were still impressive figures given the troubles experienced at the beginning of the decade and in comparison to the performance of other major automakers during the same period, proving that effective leadership and good organisation can have a dramatic effect. The acquisition of Chrysler will prove to be a challenge, although half year revenues for the division were up by 6.4%, however this was mainly due to increased sales at Maserati and Ferrari, which are not included in the profit figures given above. Fiat has announced that it expects sales of the mainstream business to fall this year in line with the general trend in the industry. A surge in popularity of models also gave BMW its most successful year ever in 2006, with net profits rising by 28%, providing relief after the company suffered from falling profits in 2005. Despite a downturn in 2007 when some market share was lost to Mercedes-Benz the company still managed to increase profit to EUR3.1bn (EUR2.9bn in 2006). However, 2008 saw an incredible fall of nearly 90% in profits to EUR330m, although partly as a result of several exceptional items recorded in quarter 4. The company made some strategic changes but fortunes did not improve in 2009 when the net profit dropped to EUR210m, a further 36.4% fall on 2008 results. Optimism for 2010 seems to be justified as half year results show a profit of EUR1.158bn, a swing from a loss of EUR31m in the same period in 2009. This remarkable turnaround for both BMW and the luxury market in general are chiefly a result of sales growth in China. 2007 was a record year for the Volkswagen Group, improved productivity and rising demand in Asia and Eastern Europe boosted operating profits by 40% to EUR6.15bn. Cost cutting and capital gains in earlier years also contributed to the large profits. Against the backdrop of serious decline in the industry, success continued in 2008 as 2007's results were surpassed with a 3% increase in operating profits to EUR6.3bn, a 15% increase in net profit and a 4.5% rise in sales. However, the recession hit hard in 2009 and profits fell to EUR1.86bn with 85% of that being contributed by the Audi brand (EUR1.6bn). However, the fact that the Group ended the year in profit was an achievement as 2009 began with large quarterly losses. There is still cause for concern as without Audi, it is thought that the Group could be in financial difficulty and there is a view that the company is now too big with the VW, Skoda and Seat marques competing against each other. The recent purchase of 20% of Suzuki may also prove to be unwise, time will tell. Regarding individual brands within the VW Group, Audi could be considered the most successful automaker in 2009 but profits were still down 42% on the EUR2.77bn made in 2008 and sales revenues were down from EUR34.2bn to EUR29.8bn. However, it should be noted that 2008 had seen record sales and revenues for Audi with a 4.1% increase in sales and a 1.7% improvement in profits when compared to 2007. With higher sales predicted for Audi in 2010 as it launches a myriad of new models, including the subcompact A1, it is forecast that both revenues and profits will improve. Of note is that Audi made its very respectable profit of EUR1.6bn on sales of 950,000 cars whilst the VW arm delivered 3.9m vehicles but only achieved a profit of EUR561m. Skoda achieved a 1.4% increase in sales but both profits and revenue were down on 2008 figures. Seat reported a loss of EUR339m compared to EUR78m in 2008 and a profit of EUR8m in 2007 (-EUR5m in 2006). Revenue fell by 12.2%. Bentley also went into a loss-making position turning the EUR10m profit of 2008 into a EUR194m loss in 2009 as sales revenue fell 47.3% from EUR1084m to EUR571m. First half figures for the VW Group in 2010 are positive with sales, revenue and operating profit increasing when compared to the same period in 2009. However, this may not be sustained in the second half of the year as the operating environment becomes more difficult. Toyota posted record pre-tax profits in 2007 but this turned to a loss in 2008/2009, the first fall in fortunes in nine years. The downturn was blamed on the recession, a stronger yen, slow sales in the US, rising costs and a suffering credit market. Thanks to cost reduction efforts, 2009/2010 showed better results with the Japanese company overall showing a small profit and the European operation reducing its losses, despite a fall in sales.

In 2007 Renault's operating margin increased by 27.4% to EUR1.354bn. This figure fell dramatically in 2008 to EUR212m but the company was still in profit by EUR599m, however, this could not be sustained and 2009 resulted in severe losses of EUR3.07bn and an operating margin of EUR396m. There are some encouraging signs in 2010 as first half figures show a positive operating margin of EUR780m compared to a negative of EUR620m in the same period in 2009 but it must be remembered that incentives were still in place for much of this period and only the results for the whole year will show the real picture. PSA 's margin increased from 2% to 2.9% in 2007 and the company made a profit of EUR826m. Unfortunately the success was short lived as losses plummeted to EUR520m in 2008 and EUR1.274bn in 2009. In alignment with other manufacturers, the first half of 2010 has shown a substantial improvement with a first half operating income of EUR1.137bn compared to a loss of EUR826m a year ago on revenue up just over 20%. In 2007 Daimler reaped the benefit of selling Chrysler by achieving a rise of 74% in EBIT (earnings before interest and tax), however, the net profit rose by just 5% and revenue was actually flat. 2008 saw a fall in net profits from EUR3.985bn to EUR 1.414bn and 2009 ended with a EUR2.644bn loss. Following the general trend, sales have improved in 2010 and a profit of EUR1.924bn was achieved for the first half year compared to a EUR2.348bn loss in the same period in 2009. The automotive division of Ford Europe also showed a marked improvement in 2007, almost doubling the pretax profits achieved in 2006. In 2008 the pre-tax profits increased again, albeit by only 5-6% (US$997m to US$1.052bn) but 2008 saw a predictable fall to US$86m, however, it is notable that the division remained in profit. Half year figures for 2010 are encouraging showing a US$429m profit compared to a US$528m loss for the same period in 2009. Overall, the trend in the European automotive marketplace is increased profits in 2007, a fall in fortunes in 2008 and then financial fallout in 2009, with small signs of recovery in 2010. However, in all instances it was in the second half of 2009 that sales and profits showed marked improvement, continuing into the first half of 2010. This coincides with the introduction of the government scrappage schemes and it is forecast that sales will drop again in the second half of 2010. It is widely predicted that the EU marketplace will shrink by 10-15% in 2010. It is also of note that increased sales in many cases are due to the growth of the Chinese and Asian marketplaces rather than expansion/stability in Europe. Some of the measures taken by manufacturers to reduce losses/improve profits have included reducing production, closing plants, both permanently and temporarily, squeezing suppliers, job cuts and the search for new sources of revenue through downstream activities such as finance divisions. Production has been lowered by many of the major companies to reduce a stock problem and in some cases to avoid redundancies by introducing shorter working weeks. Some major players, namely Ford, VW and GM have asked employees to accept long-term wage freezes and in GM's case to impose longer working hours. VW was forced to put a major redundancy programme into effect in 2009 and Nissan made redundancies in Spain, BMW has threatened job cuts and Ford sold Jaguar and Land Rover. These measures are likely to continue until a balance of supply and demand is restored. INDIVIDUAL MARKET SIZES The biggest change in European markets over recent years was the rapid growth of the Russian new car market, which broke through the 2m unit barrier for the first time in 2007. With 2.35m new cars registered it became the fourth largest market in Europe and by mid 2008 it was actually poised to replace Germany as the largest single market in Europe. However, the recession hit very hard, late that year sales fell dramatically and finally Germany retained its dominant position with Russia climbing to a position of second biggest market with 2.7m sales. The decline in the Russian market continued in 2009 when sales were down to 1.4m and it fell to fifth position in terms of market size, behind Germany (3.8m), France (2.3m), Italy (2.2m) and the UK (just under 2m). Germany has consistently had the largest market over the years and 2009 was no exception, showing a 23.2% increase on 2008 figures, the 3.8m figure equalling the success of 2000 and far surpassing any sales since then. In fact it followed a period of decreasing sales between 2006 and 2008 (2007 saw a 9.2% drop on 2006 sales and there was a 1.8% fall between 2007 and 2008).

The only other countries to see an increase in sales in 2009 were France (+12.3%), Austria (+8.8%), Slovakia (+6.7%) and Poland (+0.1%). In most countries sales fell severely with Central and Eastern Europe being hit very hard as many of its members experienced falls of well over 40%, the only exceptions being in the Czech Republic where the fall was limited to 8.1%, Slovenia (-19%) and, as already mentioned, Slovakia where there was actually an increase in sales. Western Europe certainly did not escape lightly either. Iceland had experienced falling sales since 2005 and the 43% drop in 2008 was the largest in Europe but this was nothing compared to the 76.6% fall experienced a year later. Also notable were the falls in Ireland (-62.1%), Finland (-36.7%), Denmark (-25.3%), Portugal (-24.5%) and the Netherlands (-22.6%). Elsewhere, sales figures fell by 17.9% in Spain, 17.8% in Greece, 16% in Sweden, 11.1% in Belgium, 10.8% in, Norway, 9.7% in Luxembourg, 7.8% in Switzerland, 6.4% in the UK and a small 0.1% in Italy. With economic uncertainty still prevalent in Europe, manufacturers are now looking outside of the continent for growth, especially as the Eastern European and Russian markets, which were seen as the main areas for expansion for much of the decade, appear to be collapsing. China and, to a lesser extent, India are now the key target growth areas, with the Chinese market being particularly successful for the luxury market sector. MARKET SECTORS Market sectors are broken down into four main categories : City, Medium, Large and Luxury. The growth in the city class did appear to be slowing until recently and prices did fall, in contrast to the general trend of increasing prices. However, with increasing fuel and taxation costs, sales of city cars are increasing again, with some of the middle sector age groups replacing large and medium-sized models with smaller ones, particularly as many of the new models produced are larger than their older model equivalents, e.g. the Clio, Corsa and Peugeot 207 have considerably more room inside than the previous models. Fiat has taken this concept one step further with the launch of an SUV version of the Panda, priced very competitively, it will be interesting to follow sales levels - if successful other manufacturers may follow with similar designs. Another notable trend has been the recent growth of vehicles with engine sizes under 1 litre, and those with electric and hybrid engines. In terms of popularity, five of the top ten best selling models in Europe in 2008 were from the city car category and four were from the medium sector. The restyled VW Golf regained its first position and was the only model to increase in sales in 2008. The city sector Renault Clio and Ford Fiesta/Fusion both rose in position in the 'top ten', demoting the medium-sized Opel/Vauxhall Astra to seventh place. One explanation for the decline in sales of the latter is that GM cut its production in favour of the Corsa when it was relaunched, a move which initially proved successful as sales of the Corsa increased by 41.7% in 2007; however, as the new model settled into the marketplace the surge in sales slowed and there was a drop of 10.4% in 2008, although it maintained its place as fourth most popular car in Europe. As in the last few years, the only large car to feature in the table was the VW Passat. See the following page for more details of the 'top ten' and their sales figures. Financial pressures amongst buyers, and market sentiment, are likely to result in a further shift in purchasing pattern, with people moving from large cars to the medium, or city sector. The large car market continues to struggle, with the diesel and business sector the only areas to be maintaining sales, albeit with falling margins. The VW Passat remained in top ten best selling list but sales dropped 9.4% between 2006 and 2007, and a further 15.5% in 2008, surely a sign of things to come given the economic climate. The SUV and MPV models still dominate the large car sector as sales and consequently production of the traditional saloons such as the Renault Laguna, Ford Mondeo and Peugeot 407 drop rapidly. However, companies are investing a considerable amount in re-launching cars in this sector to increase their appeal: Renault has redesigned the Laguna, Ford launched a new Mondeo and VW/Audi produced a new TT, Mercedes has boosted sales with the new-look C-Class and the relative success of the Volvo V50, driven by clever marketing, has made a significant contribution BMW continued its 2007 achievement of outselling Mercedes-Benz in terms of sales in 2006, but much of this success was due to sales of the 3-series (medium sector) and the mini (city sector). Mercedes did close the gap with the success of the new S-class launched in September 2005 and improved the situation further with record sales in 2007, undoubtedly helped by the launch of the new C-Class in September 2006. VW did not see success with the relaunched Phaeton luxury sedan.

It is notable that the price gap between the prestige and volume car makers has narrowed over the last 10 years, widening its pool of potential customers and resulting in the market share of the volume manufacturers, e.g. Ford, Renault, Vauxhall, reducing by 12% and that of the prestige marques, BMW, Mercedes, Audi, increasing by 9%. The decline in the sale of luxury and premium large vehicles is likely to be a result of rising fuel and taxation prices, the general economic climate and on a more positive note the fact that the smaller cars are now being built to a standard that was previously only available in more expensive models. For the purpose of this market segmentation the definitions of the car groupings, based primarily on dimensions and average price, are as follows (all price ranges are approximate and can overlap). City : supermini, minis and small; prices up to 14,500, e.g. Ford Fiesta, Nissan Micra, Peugeot 107. Medium : price range 12,000 to 21,000, e.g. Vauxhall Astra, Renault Scenic, VW Golf, Mercedes B-Class. Large : upper medium + multi-purpose vehicles; price range 15,000 to 45,000, e.g. Ford Mondeo, Alfa Romeo 159, Land Rover Discovery, Jaguar X-Series, BMW 5-Series, Porsche Boxster. Luxury : luxury saloons + specialist sports cars + dual-purpose vehicles (e.g. 4WD); price range 40,000 to 100,000+, e.g. BMW 6 & 7-Series and X5, X6, Jaguar XJ and XF series, the perennial Range Rover, Mercedes S-Class, Porsche 911 etc. The following table quantifies the results of a market study made in 2008 on the division of car sales in Europe. Car categories are shown on the horizontal axis and buyers' ages on the vertical axis. Values are given as percentages (error level +/- 20%). % of Total Market (total market in year 1 : 14.5 million) City Medium Large Under 25 25 to 40 41 to 55 Over 55 Total (%) 11.25 9.55 7.55 7.75 36.10 6.50 13.00 11.00 9.50 40.00 1.90 5.95 5.75 5.50 19.10

Luxury 0.22 1.48 1.58 1.52 4.80

TOP TEN BEST SELLING CARS IN EUROPE 2009 Variation on Year from 2008 Sales 1. 2. 3. 4. 5. 6.. 7. 8. 9. 10. Volkswagen Golf Ford Fiesta Peugeot 207 Opel/Vauxhall Corsa Fiat Punto Renault Clio Ford Focus Fiat Panda Volkswagen Polo Vauxhall/Opel Astra 571,838 472,091 367,160 351,807 323,536 312,925 309,134 298,914 282,780 275,638 +24.8% +44.2% -9.6% -2.4% position 1 6 2 4

Model

2009 Sales

2010 UK Price Range ()* 15,000 30,000 9,995 15,000 10,995 19,800 9,995 18,000 11,000 16,500 11,000 18,000 15,000 26,000 7,665 13,000 9,800 15,740 13,995 23,500

Not in Top Ten in 2008 -6.7% -15.2% 5 3

Not in Top Ten in 2008 +2.5% -14.1% 8 7

* Figures are rounded. The higher end prices are usually for sports versions and, where applicable, convertibles.
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NEW REGISTRATION OF PASSENGER CARS IN THE TOP TEN MARKETS IN EUROPE (,000s) 2003 Germany France Italy UK Spain Belgium Netherlands Poland Austria Switzerland MARKET STATISTICS The European market share (2002-2009) for each of the top 14 car manufacturers is given below.
21 19 % Market Share 17 15 13 11 9 2002 2003 2004 2005 2006 2007 2008 2009

2004 3267 2014 2264 2567 1517 485 484 311 269

2005 3319 2068 2237 2440 1529 480 465 308 265

2006 3468 2001 2326 2345 1635 526 484 309 270

2007 3148 2065 2493 2404 1615 525 506 298 285

2008 3090 2050 2162 2132 1161 536 500 294 276

2009 3807 2302 2160 1995 953 476 387 320 319 266

3236 2009 2251 2579 1383 502 489 301 270

VW General Motors Peugeot/Citroen

7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009

% Market Share

BMW Daimler (figures for 02-07 include Chrysler) Toyota

14 13 % Market Share 12 11 10 9 8 7 6 5 2002 2003 2004 2005 2006 2007 2008 2009 Ford (figures 02-07 include Jaguar, Land Rover & Volvo.08 comprise Ford & Volvo only) Renault-Nissan Fiat

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4 3.5 % Market Share 3 2.5 2 1.5 1 0.5 0 2002 2003 2004 2005 2006 2007 2008 2009

Honda Mazda Mitsubishi Korean

COMMENTARY
The European marketplace has changed rapidly over the last decade. The Volkswagen Group, owner of the Seat, Skoda, Audi, Volkswagen, Bentley, Bugatti and Lamborghini brands, consistently maintained the largest market share throughout the 1990s. Sales are given in the chart over leaf. VAG now holds the largest percentage of the market share in Europe at just under 21%. Despite its continuous number one position, and partly because of its dash for growth, VAG's profitability has come under pressure, influenced by its high cost base, currency fluctuations and the fall in the Eastern European market. Its broad market coverage, including the USA, Asia and South America, and ability to launch impressive new models, has enabled profitability to be maintained for the moment, although management are stating that the company will not be able to survive long-term without job losses and changes in pay structures and working conditions. The recent expansion of the Porsche share in VAG signaled a share battle which led to the paper takeover of VW by Porsche, followed by a complete reversal of fortunes. In August 2009, Porsche SE and Volkswagen AG reached an agreement that the two companies would merge in 2011, to form an "Integrated Automotive Group". In 1996 the Italian market recovered with the re-introduction of Government incentive schemes which resulted in a 20%+ rise in new car sales. This was followed by another increase to 39% in 1997, but then a small fall in 1998 of 1.6% as the schemes were withdrawn. In 1998 Fiat fell from the position of the third largest car company in Europe in terms of sales to fourth behind PSA (Peugeot-Citroen) and to sixth between 1999 and 2005. A confident Fiat is now in 6th place, behind GM and Ford, but this is likely to change with their recent acquisition of Chrysler. Fiat's higher sales in the mid 90's was aided by Government incentives and therefore must be viewed in context. Such schemes can distort markets with high sales being followed by sharp falls. There was a similar occurrence in France when the Government terminated the incentive programme early in 1996. In 2003 Fiat announced 12,000 planned job losses and has seen a 50% drop in market sales since the end of the 1980's. 2004 was the crisis point for the company, ending with the termination of the partnership with GM. However, a turnaround plan, involving a new management team put into action in 2003 and the forging of new partnerships in 2004 and 2005 has been successful, with profits being shown for the first time in five years towards the end of 2005. Profitability continued through to 2008, 2009 and is even predicted for 2010, against world wide trends. Mergers and strategic alliances have been seen by some manufacturers as the best way forward to ensure profitability. The BMW chief executive has expressed the belief that such links only provide short-term benefits but the President of hugely successful Toyota has shown interest in forming an alliance with troubled automakers. The evidence for both arguments is mixed (see pages 1 and 2 for details). Increasing competition from the European-based operations of the major Japanese manufacturers continues to change the European market. The Japanese have taken 25% of the US market, and Nissan, Toyota and Honda are competing free of EC imposed quotas within Europe with their European built models. Against this trend the strong appreciation of the Japanese currency in early 1990's caused a decline in their market share to 10.9%, the lowest level for five years. A sharp turnaround has been seen now that the currency rise has been reversed. On the basis of Japanese production in the UK, it is expected that the country will return to being a net exporter of cars within the next five years, a status lost in the mid-70's.

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Productivity and quality, the key words of the mid-80's, have reduced in significance, only because of convergence by most manufacturers on the high standards set by the Japanese; in 2005 the EU car industry pledged to put technology and quality before profit. In recent times foreign companies have invested 10 times more per worker in modern machinery than their European counterparts and as a result most European producers still lag behind the 90+ cars per worker per year Japanese benchmark. However, they are getting closer (70-80% of the Japanese figures). Nissan's Sunderland UK plant has been the most productive plant in Europe for seven consecutive years, producing an average of 90 cars per hour (approximately 99 cars/worker/year), Renault's Valladolid plant in Spain is not far behind with 89 cars/worker/year. Prices are being kept in control partly at the cost of employment. In some instances workers are having to accept lower wages or decreased benefits in an attempt to keep factories open and jobs safe as more and more companies move production to Eastern Europe, China and India where wages are low and, in the case of the latter two, the car industry is growing rapidly. Europe continues to be the most competitive and challenging automobile marketplace, boosted by factors such as surplus US capacity, demand and capacity in Eastern Europe, the Japanese, Korean and possibly the Chinese push. The economic recession of 2008/2009 may actually improve the future prospects by taking out some excess capacity. The challenge to this industry is the need to reduce the environmental impact of the motor car, to levels acceptable to society, in the face of significant overcapacity, but with some growing markets in Eastern Europe. If this battle is lost the Industry may well be facing terminal decline. THE SPECIALIST MARKET Overview Worldwide sales of luxury vehicles fell 20% in 2008 but recovery is strong in 2010. During the recession of the early 80's, when the volume producers were suffering heavy financial losses, the specialist producers remained profitable. By 1987 BMW, Porsche, Mercedes Benz, Rolls Royce, Jaguar, Saab and Volvo were all making a profit. However, the situation changed rapidly in the late 80's and early 1990's when the US market weakened, Japanese competition intensified and recession returned. Despite the economic situation, BMW continued to increase sales volume within Europe as a whole and in 1992 overtook Mercedes, a position subsequently lost with the DaimlerChrysler merger. With its abandonment of the Rover Group but retention of the Mini, BMW increased sales and profitability dramatically in 2001, a trend that continued until 2005 when the company experienced increased sales but a drop in profits; this trend continued in 2006 but reversed slightly in 2007 then reverted again in 2008. Mercedes targeted growth with the Chrysler merger and has continued this push even after the disposal of Chrysler. Volkswagen strengthened its position in the luxury market with the purchase of Lamborghini, Rolls Royce and Bugatti. Porsche made record sales and profits in 2006 and 2007, driven by strong sales of the redesigned Boxster, Cayman S coupe and 911 models. Its move into the SUV market with the Cayenne was seen as a stimulus for future growth. Sales of the Cayenne began well in 2004/05 but they slipped in 2006, then returned strongly in 2007 (up 50% in some markets). After a fall in 2008/9 a strong recovery is projected for 2010. Although customers are beginning to turn away from large 4x4s, it was Porsches belief that the niche luxury sector would not be affected but this was not the case. First the high fuel prices in 2008 dented sales and then the economic recession continued the stall, despite revised Cayenne models. Fiat strengthened Ferrari's appeal to investors by separating the marque from the loss-making Maserati and placing it in the Fiat Group as opposed to Fiat Auto. The major features of the specialist marketplace over the last few years have been : 1) high fuel prices and the recession of 2008/2009 denting specialist car sales; 2) the growth of alternative market sectors; 3) the continual demand for sports cars. 4) an emerging new niche - the electric performance/sports car, pioneered by the US maker TESLA. 1. High fuel prices and the recession of 2008/2009

The specialist sector has long been relatively resistant to economic downturns. But the surge in fuel prices in 2008; quadrupling in some markets, took the industry by surprise and certainly made the buyers think hard about fuel economy. This was quickly followed by the economic downturn which took out a lot of the new monied buyers. In addition, it became socially undesirable to be driving extravagant cars as unemployment rose and many people were losing homes, pensions and savings. Hollywood took to electric cars and politicians found a new excuse to tax larger cars. The impact is still being felt and it may be some time before its full extentt is seen.

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2.

Alternative Market Sectors

The alternative markets comprise, Multi Purpose Vehicles (MPVs), the traditional 4x4 off roaders and the Sports Utility Vehicles (SUVs), all of which have proved to be lucrative from the 1990's through into the early years of the 21st century. The trend now is towards smaller MPVs and SUVs rather than abandonment of the class. The new categories of low emissions vehicles, hybrids and electric cars are fast growing sales in the UK doubled in 2007,and more than doubled again in 2008 according to Honda. Toyota announced that 28% of Lexus sales were the hybrid powered Prius. These are covered in more detail below under "New Technologies". The Multi-Purpose Vehicle (MPV/Minivan) Market The MPV market can be divided into three categories, the mini sector, e.g. the Nissan Note, Vauxhall Meriva Fiat Sedici and Ford Fusion; the compact/midi sector, e.g. the Citroen Xsara / Picasso, Renault Scenic, Ford CMax, Mercedes B-Class and the large sector, e.g. Ford S-Max, Renault Espace, Toyota Verso and VW Sharan. Overall, this market grew substantially from 1995 onwards, and by 2000 sales exceeded 600,000 units. The market continues to grow with a 22.8% increase in sales in 2004 compared to 2003 in the overall European market and in the UK a 16.5% increase in 2007 over 2006. The market fell in 2008, as the recession hit, but is returning in 2010. The Renault Scenic has been the best selling model in the midi MPV class since its launch in 1997, well ahead of its nearest rivals the Vauxhall/Opel Zafira, Volkswagen Touran and the Citroen Picasso. However, the C4 and Xsara Picasso from Peugeot Citroen finally eclipsed the Scenic in 2007, with overall sales of 320,000 units. The success of the sector has been at the expense of the traditional medium category models, although the latter did show growth in 2004-2006 thanks to the launch of new models. Sales of full size MPVs are slowing with a 10% decline in sales in 2004 compared to 2003. The growth of the mini MPV looks set to continue, the only danger being that with more major manufacturers targeting this area there could be over supply in the future. The Peugeot 307/308 and Honda's Jazz and Civic, smaller and far more car-like than even the mini MPV, are also potential threats and the popularity of the sector has resulted in higher than average prices rises, which could also slow down sales. In 2009/2010 the estate car seems to be returning to the market, replacing and reducing sales of both compact and full scale MPVs. 4x4 Off Roaders (Leisure/Luxury Market) The original Range Rover from Land Rover, previously owned by Rover then Ford but now under new ownership by Tata of India, can be said to have virtually created the off road market in Europe, which now exceeds 400,000 units per year, up from under 60,000 units in 1979. Range Rover has since moved into the realm of the luxury car, competing with the likes of BMW, Jaguar and Mercedes, and Cadillac in the USA.. Competition resulted in a fall in Land Rover's sales in the early 2000s but made a strong recovery in 2005-2007, courtesy of the launch of the new Range Rover Sport and the Discovery III, the latter being a cross between the leisure 4x4 and an SUV. Land Rover, celebrated its 60th birthday in 2008 year, saw worldwide sales in 2007 exceed 200,000 units for the first time ever, with UK sales exceeding 50,000 units, also for the first time. In the first half of 2010 the highest ever level of sales was achieved. The M-Class has continued to be successful for Mercedes and for BMW the X-5, and now the super luxury X6. They have established excellent sales by virtue of both strong off and on road performance. Other competitors in the class include Toyota's ever popular Land Cruiser, Nissans X-Trail and stylish Mureno, Volkswagen's Touareg, the Volvo XC70 and 90 and the Land Rover Discovery. Porsches Cayenne sales slowed in 2006 but resumed selling well with 2007 world sales nearly 50% up on 2006, thanks in part to the introduction of a new model. A Cayenne electric hybrid has also been showcased. The Volkswagen Touareg, which shares its chassis with the Cayenne, has also been selling well in the UK, helped by very targeted advertising. The new, stylish Audi Q7 also looks good. These sectors were all hard hit in 2008/2009 but are recovering in 2010.

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The off-road market had been predicted to fall for several years but contrary to this, sales have grown steadily, increasing by nearly 65% over the 6 years to 2007. The marketplace finds these products desirable despite concerns about size, weight, fuel economy and emissions (which though higher than comparable modern saloon cars are still much lower than the older cars). Range Rovers new fuel efficient turbo diesel V8 demonstrates the manufacturer's response to market demands and stylish new designs from Audi, BMW with its X-6, and new Volvos point to continued life in this sector. The fuel price increase of 2008 and subsequent economic recession has had a strongly negative impact. This market has been hit but is showing great resilience. Sport Utility Vehicles (SUVs) The off-road market has come under threat from the introduction of the new generation of SUVs, which descend from passenger cars and have lightweight unibody frames and modern suspensions, they enjoy the high seat and four-wheel drive of the off roader combined with passenger car handling and comfort. The advantages of the lightweight SUVs over the traditional off roaders are nimbler handling, a peppy performance, quieter, more fuel efficient and, moreover, cheaper, posing a serious threat to the dinosaurs of the 4x4 market. Land Rover responded to the new SUV market by introducing the smaller Freelander 4x4,which now competes very favourably with the Honda CR-V and Toyota's RAV, all priced between 16,000 and 26,000 in UK. The launch of the Freelander 2 in 2006 strengthened Land Rover's position in this sector, despite competition from the luxury GL-Class SUV from Mercedes. Already successful in the US, the strong selling smaller BMW X-3, could be a competitor, although with a price range of 25,000 to 35,500 the latter will be a competitor for the Discovery and the Mitsubishi Shogun rather than the SUV market. Fiats smaller 4x4 could also threaten. Sales figures show that there is definitely a market for both the large 4x4 models and the smaller and cheaper SUVs but the trend seems to be moving in favour of the latter. It is possible that SUVs will account for up to half of Europe's prestige car sales in the near future as companies improve model specifications, offering higherthan-ever levels of high-tech, safety and 'infotainment' equipment, better fuel economy and even electric versions. 3. Sports Cars

Roadsters Mazdas MX-5 initially led the growth in the market with the brilliant combination of MGB and Lotus Elan. European sales of the MX-5 slumped from 12,500 in 1991 to 4,900 in 1994 but the launch of a new model in 1998 revived Mazda's popularity and the launch of yet another new model in 2005 assured continued sales growth in 2006 and 2007. Other impressive performers include the MGF (1995-2005), Lotus Elise, BMW Z3 followed by the Z4, Alfa Romeo's Spider, Mercedes SLK, the Audi TT roadster, Porsche's Boxster and the promised new sub 40k roadst6er from Jaguar. The MGF was bought by Nanjing and returned to the UK in 2008, but only in small volumes. Over the last ten years the convertible market has grown from 17,706 to 98,316 units. In 2001 new convertibles took 2.4% of the UK new car market and by 2006 the share had climbed to 5.3%. Growth continues in 2010, thanks to the innovation of the hard top convertible. The new coup convertibles (CCs), with their electrically folding metal roof, have driven the 2005-2010 surge in popularity of the sports car and have helped spread sales more evenly throughout the year. The concept started with the Peugeot 206 and 307, now the 208 and 308. Mercedes followed suit with the SLK Class Roadster as did Renault with the Mgane CC, Lexus with the SC and Vauxhall/Opel with the Tigra. All the volume manufacturers are joining the party. Approximately one quarter of the convertibles sold throughout Europe are purchased in the UK - despite the climate! Only in Germany are sales figures greater but the percentage growth in the UK is far higher, 114% since 1999 compared to 32% in Germany. It is interesting that there is a notable increase in the number of women over 60 buying expensive convertibles!

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Sports Coups European sports coups saw a 32% increase in sales in the mid 1990s, bringing the sector up to 37,426. The Vauxhall Tigra had a particularly impressive dbut performance with sales of 6,787, ahead of the Ford Probe (6,576) and Vauxhall Calibra (4,920) but behind the then sector leader, the BMW 3-Series coup (9,751). Since then the market has continued to grow. The Audi TT and Mazda RX8 have sold well. The new 2007 Audi TT and the stunning Audi R-8 look continued this trend. New entries introduced in 2004 included the Nissan 350Z, the Chrysler Crossfire (discontinued Nov 2007), the BMW Z4 coup, the revised BMW 3-Series coupe and the Porsche Cayman in 2006. VW delivered a stunning new Corrado in 2008, which sold well despite the recession. In 2010 they followed this with the new Scirocco which leads the market, alongside the new Alfa Romeo Guiletta, BMWs Series 1, Peugeots RCZ and even the hybrid Honda CR-Z The upper end of the market is dominated by the BMW's M5 and M6-Series and the Mercedes SLK coupe with the Audi R-8 and new Jaguar XKR trying to upset the status quo. Over 80,000 SLKs were built in 2004. The legendary Porsche 911 leads the sector in dynamic performance but sells in much smaller numbers, as does the new Jaguar XKR which provides stunning but controversial looks with effortless performance. Variations on the coup but targeted at the same market have been the hugely successful Subaru Impreza and Mitsubishi Evo. These offer coup style with blistering performance, 4-door convenience and 4-wheel drive stability. They are often bought to participate in "track days" and sell at much lower prices than the Porsche/Mercedes/Jaguar. It was predicted in 2007 that, overall, sports car sales in Europe will continue to grow over the next few years, however the recession of 2008/2009 brought an end to this with a fall of approximately 20% over this period. 2010 is showing signs of recovery. DIESEL CAR SALES IN EUROPE As the advantages of diesel over petrol, petrol-electric hybrid and LPG increased with improved technology, so the market share of diesels grew from 22% in 1996 to 32% in 2000, 43% in 2003, 47% in 2004 and 49% in 2005 and well over 50% in 2009/2010. It is predicted that this trend will continue with the percentage sale of petrol fuelled cars falling to 37.1% by 2015. There are a number of reasons for the growing popularity of diesel-fuelled cars: They are superior to petrol-consuming models in terms of fuel efficiency, an advantage that was consolidated by the introduction of direct-injection car diesel engines and turbocharging and then taken forward by Common Rail technology when invented by Fiat in 1997 and licensed widely. A diesel engine is 25% more efficient than an equivalent petrol engine, this directly translates into reductions in carbon dioxide emissions, a very important factor as increasing global legislation demands lower vehicle and greenhouse gas emissions. The world's liquid fossil fuel resources are diminishing; recent price rises act as a reminder. Indirectly, improved efficiency means that fewer shiploads of petroleum need to be transported, resulting in less transportation linked pollution. Politically, European governments see an advantage in encouraging development of diesel engines because it keeps their car makers ahead of the US and Japanese competition - both nations are antidiesel, in America people care little about saving fuel and in Japan they push for petrol-electric hybrids as most of their travelling is short-distance, in congested cities, and not least of all Toyota and Honda have both invested in developing hybrid technology. However, both Toyota and Honda are launching new diesel models into Europe and the USA, suggesting recognition that this is the way forward, and the US Environment Protection Agency has developed a diesel engine that will meet near zero emission standards as the country moves to becoming a net oil importer and sees the need to encourage the use of diesel instead of petrol. As a result, all manufacturers are stepping up diesel engine development and offering it as an alternative for more and more models. The biggest block is the limited availability of diesel fuel stations in the USA, though this is slowly improving. So far the largest growth area for diesels has been the executive and medium car sectors, with diesels accounting for half the executive cars sold in some countries, and nearly 40% of the total UK market. However, as petrol costs have risen, the leading manufacturers are targeting the younger generation and are increasing the availability of diesel engines for smaller cars.
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NEW TECHNOLOGY : ALTERNATIVE FUELS AND ELECTRIC CARS Emerging competition for both diesel and petrol/gasoline fuels is in the form of renewables, ethanol or plant oil based fuels. These can be blended with both diesel and petrol/gasoline but there are concerns over the overall environmental impact of these materials. New cleaner biofuels are predicted to be a significant growth area. Prompted by concern about atmospheric pollution, global warming and a decrease in fuel sources, manufacturers have been researching alternative power systems for some time. A KPMG survey predicted that for 84% of consumers, fuel efficiency will be a key factor in the next 5 years. Alternative fuels, e.g. compressed natural gas, while lowering emission levels significantly give rise to vehicles that are more expensive than equivalent petrol powered counterparts, less powerful and have a much shorter range than petrol or diesel powered vehicles. The fuel is cheaper but the cost of building a commercial refuelling unit is almost twice that of a petrol refuelling unit due to high equipment costs. Liquid alternatives to petrol such as methanol and ethanol can be supplied using equipment similar to a petrol pump but have other drawbacks. Methanol, while having very low emissions, is corrosive, conducts electricity and very dangerous in accidents and ethanol suffers as there is still a limited infrastructure to make or deliver it to the motorist and there are increasing concerns about its overall environmental impact, particularly on food prices. Liquefied petroleum gas is one readily available alternative fuel, with one million cars running on it worldwide. It is cheaper than petrol/gasoline and has a relatively high energy content but only gives slightly lowered emissions so is seen as a compromise rather than a solution. Most cars can be converted to run on LPG, its main benefit is fuel efficiency and therefore is mostly used for vehicles with a high petrol consumption. In the US in 2005, the number of vehicles running on alternative fuels was just over 8.3 million. A further 700,000 were sold in the first half of 2006 but the proportion of alternative fuel cars in the US is still under 4% of over 230m cars on the road. In the sunshine belt of the USA ethanol is blended with gasoline (10-15%) to reduce gasoline usage. It is not universally popular due to the increase in fuel consumption. Electric cars are politically backed in many European countries and the US. Improvements in battery technology is encouraging many more manufacturers to put electric cars into major production. At the end of 2005, the Norwegian company Think Nordic launched a new concept, a plastic-bodied electric vehicle called Think primarily for use in cities. The concept has gone down well and expansion into several European cities is ongoing, along with plans for manufacture in the US. It is the first electric car to seat four people and have a reasonable amount of baggage space. It has a top speed of 30 mph (50 km/hr) and a range of 60 miles (100 km). The company aims to sell approximately 5,000 units annually. Another company, Tesla Inc. of the USA, launched an electric car at the top end of the luxury sports car market. Based on a Lotus Elise chassis and selling at $100,000 it has done well, particularly with Hollywoods green celebrities. Their second model, a 4 seater, is due out soon. AUTOMATION The use of robots in manufacturing industry has continued to grow steadily, driven more by the quality benefits than the original idea of manpower replacement for dirty and repetitive work. The following table gives a breakdown of the total number of installed industrial robots in the major industrial nations approximately 40% of which are presently involved in automobile production. First manufactured by Unimation in 1962 and based on an invention by George Devol, the use of industrial robots initially spread quite slowly. The Stanford arm, invented in 1969, expanded use in automotive with the PUMA name being the best known unit of this genre. The Japanese took a strong interest in the late 70s and now over two thirds of the world's industrial robots are made and used in Japan; where robotic applications continue to expand in the manufacturing industries. This technology has spread in South East Asia and Korea in particular has a fast expanding robotics use. In the USA the growth rate has slowed and industrialists are looking for significant improvements in the technological skills of robots. This is emerging, with new machines now capable of carrying out complex surgical procedures. Advances in robot assembly lines continue to be evolutionary than revolutionary as smaller, nimbler robots provide the flexibility required for a truly successful assembly line, the aluminium Audi A8 saloon car assembly line being a case in point. It is estimated that it takes between two and three years to recoup the cost of installing automation. The best results come from an integrated use of robots alongside humans, with robots working on the monotonous, strenuous and dangerous tasks, as well as some of the more intricate work on electronic components. The number of robots in the industry will continue to grow, perhaps most significantly in the car makers suppliers who manufacture ever more complex component systems.
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