By Christiaan Hetzner and Deepa Seetharaman
FRANKFURT/DETROIT (Reuters) - Europe's car market may have finally stopped shrinking, but a manufacturers' price war will not let up until sales increase significantly, a senior Ford
Second-quarter results have suggested mass-market carmakers are closer to breaking even in Europe than previously thought.
But they still have little option but to offer buyers hefty discounts and incentives after the regional market fell from peak sales of 18 million in 2007 to less than 14 million now.
"From a pricing perspective I'm not seeing any relief at the moment yet," Roelant de Waard, sales chief of the U.S. carmaker's European business said in an interview with Reuters.
Ford earlier reported sales in its 19 core European markets rose 8.7 percent to 90,000 vehicles in July driven by demand for its B-Max small MPV.
"All customers seem to be aware that we are in a recession - as an industry, as a region - so they're expecting very good deals."
Confidential research seen by Reuters indicated that discounts by mass-market brands jumped 17 percent in May from a year earlier across Europe's five biggest markets.
De Waard said much of the problem stemmed from unused manufacturing capacity, with plants able to produce in excess of 4 million vehicles beyond what was required to meet European demand.
"We come from an industry of 18 million and even at that level there was overcapacity. And while there has been activity by us and our competitors to adjust capacity, that capacity will take a while before it's actually gone, it's really the end of next year that the first plants really close," said de Waard.
Ford, which in July hiked 2013 guidance to an unchanged pre-tax loss in Europe of about $1.8 billion from $2 billion, recently closed two ancillary plants in the UK and plans to shut its Genk assembly line in Belgium at the end of 2014.
Rival General Motors
De Waard forecast the sales rate for the European market as a whole would stabilize at the current level of 13.7 million for the remainder of this year after hovering around 13.5 million for the past 12 months.
"The present annualized sales rate ... in our 'Europe 19' markets is a good sign, but the industry is of course still capacitised for well above that. Until we see some significant sales improvement I expect the pricing pressure to stay," he said.
"We've seen two months of sales above the run rate we saw the last 12 months so that's good but I'd like to see a couple more before we declare that we're on an improving trend."
The Ford Europe sales chief expected the brand to match or slightly increase last year's market share of 7.9 percent thanks to new products like the upcoming EcoSport subcompact SUV.
"There is still more than a year of new products being introduced so that gives us the confidence that this not a blip," he said, referring to a rebound in Ford's share from levels below 7 percent early this year.
Ford is making progress shifting volumes away from low-margin business with rental agencies to more profitable business with retail and fleet customers.
In the seven months through July, its share of sales made to rental companies and dealer registrations fell to 28 percent from 35 percent a year earlier. Ford said this brought it below the industry-wide average of 30 percent over the period.
(Reporting by Christiaan Hetzner and Deepa Seetharaman; editing by Maria Sheahan and John Stonestreet)