New Report Available: Italy Autos Report Q3 2013

In the first four months of 2013, vehicle sales in Italy declined 13.8% year-on-year (y-o-y), to 383,786 units. BMI forecasts a decline of 10.4% in the market over the full year.

Passenger car sales declined 12.3% y-o-y in 4M13, to 471,750 units. In April, sales in this segment declined 10.8% y-o-y, to 116,209 units, which is broadly in line with the rate of decline in the market over the yearto- date. BMI believes that private consumption will continue to contract in 2013 as Italian households are hit by ongoing austerity measures, including higher taxes and cuts in social spending.

In 2013, we expect LCV sales in Italy to decline 14.5%, and heavy truck sales to decrease 16%. We expect business and manufacturing activity in the country, key drivers of growth in the CV segment, to remain relatively subdued over the year. Furthermore, we believe that many businesses are delaying their purchasing decisions in the face of this economic decline. This outlook has partly informed our bearish sales forecasts for the year.

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BMI believes that Italy's labour market still remains relatively uncompetitive and rigid, and production will continue to be uncompetitive. Indeed, passenger car production in Italy declined 18.3% in 2012, to 396,817 units. Output from Fiat makes up most of this figure. The company's decision to consolidate manufacturing in Italy, despite the poor operating environment, has caused us to revise our longer-term production forecasts for the country.

In 2013, we expect to see a 6% increase in production volumes on the back of low base effects and Fiat's restructuring strategy. In the first quarter of 2013, however, passenger car production decreased 7.8% y-o-y, to 101,005 units. This was chiefly due to the Fiat's low output levels on the back of weak sales figures in its primary European markets. We expect to see a pickup in y-o-y growth later in 2013 as end-2012 figures were particularly poor.

In 2013, we expect CV production to decline as sales drop off further in Italy and across Europe, and the business environment remains weak across the region. Accordingly, we forecast a decline of 5% in LCV production, and a 1.5% drop in heavy truck production.

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