German carmakers delivered a sombre message at the ongoing Paris car show on Friday, warning of tough times ahead as they begin to feel the pain of the credit crunch and high energy prices.
“We face a difficult year in 2009,” Volkswagen CEO Martin Winterkorn said in Paris. “The financial crisis is much worse that we had thought.”
The Association of the German Automobile Industry, VDA, estimates that the financial crisis has already made German consumers jittery about buying new cars. The group registered a 7 percent drop in sales of new cars in Germany in September this year while exports plunged by 10 percent in the same month.
High oil prices are forcing German customers to increasingly turn their backs on sports cars and opt for smaller and cheaper cars. German luxury carmaker Porsche's sales plummeted 29 percent in September this year while BMW recorded a fall of 11 percent.
In comparison, sales of compact cars such as Smart, Fiat 500 and Renault Twingo soared by 21 percent in the same month.
Carmakers have signalled that they may change their strategy to react to falling demand.
“If necessary, we'll scale back production in Europe,” BMW CEO Norbert Reithofer said. Porsche Chief Wendelin Wiedeking said he would stick to his key principle of adjusting supply to meet demand.
Porsche and BMW are also grappling with steep losses in the US which has been struggling much longer with a credit crunch and slowing growth.