Ghosn favors incentives to revive Europe car demand

Renault CEO Carlos Ghosn supports the use of scrapping incentives to mitigate falling demand for new cars in Europe, which is headed toward a sixth straight year of decline as austerity measures keep customers out of showrooms.

“There is no debate that at some point there will be need for economic policies to stimulate Europe,” Ghosn said at news conference in Cascais, in the outskirts of Lisbon. “But I’m not expecting it in the medium term, over the next three years.”

Ghosn, Fiat CEO Sergio Marchionne, who also chairs Europe’s ACEA car lobby, and Volkswagen CEO Martin Winterkorn, voiced their concern about government austerity measures at the Geneva auto show earlier this month.

The use of incentives isn’t backed by all carmakers because there usually is a big decline in demand when the subsidies end.

“You need to anticipate demand when you need it,” Ghosn said. “Look at what central banks are doing today; they’re swamping markets with liquidity. But these liquidities, they will take them back later on. That’s how you deal with crises.”

Spain reintroduced incentives last month to spur auto sales in the country. French Industry Minister Arnaud Montebourg said on March 3 he favors car-scrapping incentives to revive the auto market and push people to buy more fuel-efficient models, as opposed to a proposal being discussed to raise taxes on diesel fuel. The government isn’t likely to make any decision on the matter this year, he said on March 5.

The euro area’s economy will shrink in back-to-back years for the first time in 2013, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said on Feb. 22. Gross domestic product in the 17-nation region will fall 0.3 percent this year, compared with a November prediction of 0.1 percent growth.

Renault and Fiat have seen their sales plummet more than the average last year on the continent, as both carmakers are more exposed to southern European countries such as Spain and Italy, where governments have implemented severe cuts, undermining demand for new vehicles.

The region’s car sales in January fell to the lowest for that month since records began in 1990, with Spain’s market, once the region’s fifth-biggest, now lagging behind Belgium, even as Spain has four times as many people.