More needed to revitalise ailing automotive industry: Deloitte

06 April 2009

With consumer confidence at all time low, the automotive industry is struggling to see the light at the end of the global economic downturn. 

According to an analysis by Deloitte Touche Tohmatsu's global manufacturing industry group, the global automotive industry is expected to benefit directly from an injection of around $50 billion in economic stimulus funds.  The funds, however, are just a small percentage of the estimated $3.6 trillion in economic stimulus packages committed by various governments around the world.

''What the automotive industry most needs is to have customers buy again,'' says Hans Roehm, managing partner with Deloitte global manufacturing industry group.  ''The government stimulus efforts so far are helpful, but more is required to really boost consumer confidence and drive them back into the showrooms to buy cars.  That's when we will see a real turning point for the industry.''

A substantial portion of the stimulus funds have been committed to stricken auto makers General Motors Corp, Chrysler LLC and GMAC LLC, the auto-lending arm of GM, as part of the $700 billion Troubled Asset Relief (TARP) programme in the United States.

''The mix of the direct assistance to automakers and other incentives to spur demand in the market has been a lifeline to industry survival,'' says Michelle Collins, automotive industry leader for the Deloitte member firm in the United States. ''However, incentives to increase demand must go hand in hand with measures to increase consumer confidence and to make credit more free flowing to finance consumer purchases and dealer inventory plans.''

Deloitte's global manufacturing industry group's analysis shows that in markets like China, Italy, France and Germany, consumers are being encouraged to replace their older model vehicles with new ones.