The PTW industry and the crisis

Publication date: 10 July 2009

ACEM reports a 35% decline during the first quarter of 2009.

Registrations for the European PTWs market have been dropping sharply since the last quarter of 2008 (-34%). The severity of the economic downturn is putting users’ purchase power under immense pressure with negative consequences not only for the manufacturers but also for the linked industry, which spans from spare parts suppliers to dealers' networks.

During the first quarter of 2009 the European PTW market declined by 35%. Over the same period the automobile market was down by 17.2%.

Facts and figures of the PTW sector

In 2007, more than 2.7 million PTWs were sold in Europe. Having benefited from 6 years of continuous increase of the market (+ 22 % between 2002 and 2007), the PTW fleet has been steadily growing, reaching about 33 million PTWs, mainly pushed by an increasing urban mobility demand.

The aggregated PTW sector's (manufacturing, plus upstream and downstream activities) turnover amounted to 34 billion Euros in 2006.  Within this, manufacturers’ turnover reached 7 billion Euros in 2006 and showed a relatively higher increase than the entire manufacturing and automotive sectors, with + 12% between 2004 and 2006. Over the same period employment in the PTW sector rose constantly, contrary to many other industrial sectors, reaching over 150,000 jobs in 2007.

Eurostat recorded 870 powered two-wheeler companies as manufacturers in 2006, and their average yearly turnover of Euro 8 million suggests a significant proportion of SMEs. The downstream sector depending on the PTW industry is represented by a network of over 37,000 dealers and independent repair shops.

The Powered Two-Wheeler Industry in the economic crisis

These remarkable performances must be set against the current economic downturn. In 2008, the market suffered a reduction to 2.5 million PTWs (-7.4% over 2007). This drop mainly occurred during the last quarter of 2008, which showed a significant contraction (-34%) over the same period of 2007. The first quarter of 2009 has been more severely impacted by a further deterioration of registrations (-35%) over the same period of 2008, with multiple consequences on manufacturers, suppliers and distributors. Given the seasonal pattern of PTW sales – mostly concentrated in spring/summer - the full impact of the current economic crisis will only become measurable in the second semester of the year.

In the absence of supporting measures the current PTW production drop, ranging from -30% up to -40%, is likely to remain unchanged. Facing the crisis manufacturers had to adopt extreme countermeasures such as reduced working hours, production breaks, contract workers’ dismissals and permanent staff reduction (up to 25% in certain cases). Whilst it is in ACEM members’ interest to try and safeguard skills and employment in the sector (manufacturing, suppliers, dealers), it is obvious that in current conditions this is no simple task. In the current situation, ACEM has been calling for measures aimed at supporting the PTW sector.  [read article]

Suppliers and distributors are confronted with even more serious financial difficulties as they suffer from the combined effects of the orders’ fall, over-stock and from the downgrading of their creditworthiness. About 10% of the PTW suppliers present a bankruptcy risk, while others have already ceased their activity.

Countermeasures to fight the crisis

It is of paramount importance to define proposals that are achievable by the PTW industry, but more importantly that are likely to be accepted by consumers.  The cost increase for the consumer coming from some of the policy options being considered by the European Commission would represent an average of +15%, with peaks in the range of +30%. This is clearly incompatible even in a bull market. The combination of the entry into force of a delayed Framework Regulation in conjunction with the 2013 application of Directive 2006/126/EC on driving licences, which will determine a reshaping of the market towards new categories of smaller cylinder capacity, lower cost, reduced margins for manufacturers, might go well beyond the expectations of the policy makers.

Source: ACEM