European Sales of New PTWs Plummet 35% in Q1

Sales of new powered two-wheelers (PTWs) in Europe dropped 35% year-on-year in the first quarter of 2009, following a 34% decline in the fourth quarter of 2008, according to the Association of Motorcycle Manufacturers in Europe (ACEM).

Sales have been dropping sharply since the last quarter of 2008, the association said, as the severity of the downturn puts purchasing power under immense pressure with negative consequences not only for manufacturers but also for linked industries from spare parts suppliers to dealer networks.

According to ACEM, more than 2.7 million PTWs were sold in Europe in 2007. After six years of continuous market growth (totaling 22 % from 2002 to 2007), powered mainly by urban-mobility demand, the European PTW fleet has reached about 33 million units.

Turnover in the overall PTW sector (manufacturing, plus upstream and downstream activities) amounted to 34 billion euros in 2006. Of this total, manufacturing turnover reached seven billion euros and showed a higher increase than the manufacturing and automotive sectors as a whole, which recorded a 12% growth from 2004 to 2006. During the same period employment in the PTW sector rose constantly, contrary to the trend in many other industrial sectors, reaching over 150,000 jobs in 2007.

Eurostat recorded 870 PTW manufacturers in 2006, and their average annual turnover of eight million euros suggests a significant proportion of small- and medium-sized enterprises (SMEs). The downstream sector depending on the PTW industry is represented by a network of over 37,000 dealers and independent repair shops, the association said.

Market in Crisis

The economic turmoil turned the European PTW market downward in 2008, pushing sales down 7.4% to 2.5 million units. The drop occurred mainly during the last quarter of the year, which experienced a massive contraction (-34%) over the same period of 2007.

The first quarter of 2009 hit the industry even harder, with a further 35% deterioration in registrations having dire consequences for manufacturers, suppliers, and distributors. ACEM said that given the seasonal pattern of PTW sales, which are concentrated mostly in the spring and summer, the full impact of the current economic crisis will become known only in the second half of the year.

Without supporting measures, ACEM said, the current PTW production drop is unlikely to improve. In the face of their current crisis, manufacturers have had to adopt extreme measures such as reduced working hours, production breaks, the dismissal of contract workers, and permanent staff reductions (of up to 25% in some cases).

In the current dire situation, ACEM said, it has been calling for measures to support the PTW sector.

Suppliers and distributors are confronted with even more serious financial difficulties as they suffer from the combined effects of a drop in orders, excessive inventory, and the downgrading of their creditworthiness. About 10% of all PTW suppliers are at risk of bankruptcy risk, ACEM said, and others have already shut down.

Further Impact?

More problems lie ahead. According to Jacques Compagne, ACEM's secretary general, in the midst of the turmoil caused on European markets by the economic crisis, two major policy changes could bring even more uncertainty to the PTW sector.

"Very soon, two new regulations will deeply impact our business," Compagne explained. "First, a new Driving License Directive will require manufacturers to adapt production to new vehicle categories. In terms of industrial planning and investment, the Third Driving License Directive is already having a strong impact on the PTW industry. The entry into force (of new driving license rules) in 2013 will dramatically coincide with a technical regulation, put on hold by the EC for many years. This conjunction will make the transition unnecessarily difficult for the PTW sector."

The secretary general went on to say that the second regulatory challenge, a new Framework Regulation, will set new type-approval requirements. "While the industry does not oppose changes aimed at making motorcycling more sustainable in terms of road safety and emissions," he said, "the combination of two important policies will have to be carefully weighed against industry possibilities and market acceptance, especially taking into account the current economic situation."