Chairman of Daimler and head of Mercedes-Benz cars Dieter Zetsche speaks at a news conference at the Paris car show

Daimler cuts growth forecast for global car market

German carmaker Daimler has cut its growth forecast for the global car market as it sees a fledgling European industry recovery faltering.

Speaking at the Paris car show today, Daimler chief executive Dieter Zetsche blamed cooler demand in emerging markets and a plunge in Russian sales for his expectations that the global car market will grow by 3 to 4 per cent this year, down from a previous forecast of 4 to 5 per cent.

Other executives shared his caution, particularly in Europe where a six-year sales slump has left demand around 20 per cent below pre-crisis levels and sluggish economies have put a question mark over whether the gap will close anytime soon.

"Perhaps we will arrive at 13 million or 13.5 million (overall vehicle sales in Europe). But the market won't return to [the pre-crisis level of] 15.5 million, I'm sure of it," Martin Winterkorn, the chief executive of Europe's biggest carmaker Volkswagen, said on the eve of the show.

Europe's car market has returned to growth this year, although widespread incentives for buyers and government subsidy schemes in some countries have made it difficult to gauge the strength of underlying demand.

Demand has been erratic and executives are particularly concerned about Russia – once tipped to overtake Germany as Europe's largest auto market – where new car sales tumbled 26 per cent year-on-year in August due to a slowing economy hit by Western sanctions over the crisis in Ukraine.

"Earlier this year, momentum was at the upper end of expectations but it's flattening out a bit," Ford Europe chief executive Stephen Odell told reporters, referring to the broader European market.

BMW chief executive Norbert Reithofer, meanwhile, said price levels in Europe had improved, but not by as much as the German carmaker's managers would have liked. He forecast it would take more than three years for the European market to return to pre-crisis levels.

Despite their concerns, some executives said they were keeping faith with the Russian market, and in some cases sticking to sales forecasts.

"The Russian market will come back. One has to think in longer terms," Volkswagen's Winterkorn said. "It's right, we cut production [temporarily in September at the Kaluga plant] but Russia will come back, I'm convinced of that."

Toyota also said it expected to ride out the worst of the slump in Russia's car market, and stuck to its goal of increasing sales to a million vehicles in Europe next year.

Didier Leroy, the Japanese carmaker's head of European operations, said that while sales of entry-level cars in Russia were down 25 to 30 per cent, hurting many of its competitors, demand for premium vehicles was down a more modest 8 per cent.

Vehicles such as its Camry and Lexus have helped Toyota to boost its share of the declining Russian market by about 1 per cent this year, he added.

With carmakers scrapping for market share across Europe, the Paris show is packed with new fuel-efficient small cars and compact SUVs designed to tap into stronger performing segments of the market.

Daimler's Zetsche said growth was also slowing in emerging markets such as Brazil and Argentina, but he played down fears of a sharp slowdown in China, the world's biggest car market.

"Growth has slowed, but from a much broader base," he said. "We must not forget that it is the second largest economy. We see double-digit growth this year.”

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