General Motors Europe president and Opel CEO Karl-Thomas Neumann announced Opel’s ambitious plans to return to profitability by 2016 and be the second largest European automaker by 2022 at the Geneva Motor Show in March. The brand improved in 2013 after losing $844 million, down from $1.94 billion in 2012, but industry experts and analysts believe its goals are still a little far fetched.
The six-year downturn in the European car market is beginning to come to a close, The Detroit News says, but if Opel hopes to achieve its goals a large uptick in car sales will have to happen for all automakers, not just Opel. Analysts also aren’t predicting much of a change in the market between now and 2022, making their goals even harder.
Jens Schattner, an analyst with German company Macquarie Research, told Detroit News that automakers such as Opel could return to the black if they cut development and research costs dramatically. However this may put a damper on the quality of new products going forward.
“It’s all about getting a reasonable balance between investment and costs. Yes, 5 percent (market share) could be feasible, but a lot depends on volume, demand and market share gains. If Opel aggressively cuts costs and neglects investment for the future, this won’t be sustainable,” Schattner said. “There has to be an efficient cost base and ongoing investment. This would be a very, very ambitious target for 2018, but for 2022 could be a very realistic time horizon which could then be sustainable.”
Opel announced a $5.25 billion investment through to 2016 in order to develop 23 new models and 13 engines. It was recently expanded to include 27 new models and 17 engines between now and 2018, so it appears cutting development costs won’t be on Opel’s agenda.
John Wormald is an analyst with British automotive consultancy Autopolis. He notes that Opel should be able to reach its goal of a market share of 8 percent, but thinks its idea of reaching that by 2022 is unrealistic due to the unpredictability of the European auto market.
“Nobody can forecast economic and social activity by 2022, and car sales aren’t likely to be all that vigorous. There’s no particular reason why Opel-Vauxhall should jump over all the others, after all, everybody is doing the same thing,” Wormald said.
All in all, analysts seem to believe Opel’s targets for 2022 are “ambitious” but not impossible, with their goal of returning to profitability being completely attainable. However they also say a large company like General Motors almost has to have overly ambitious goals, as they may have a chance on achieving them if they put forth a valiant effort.
Comments
This IS possible BUT will rely on Opel gaining a home market share equal to Vauxhall in the UK, that means gaining around a 5% increase in market share in Germany. In order to do thateither the market grows and Opel are the main beneficiary or Opel take sales from competitors – neither is very likely. What is possible is increasing Opel sales in northern Europe where sales are weakest, Opel perform better in Southern and eastern European markets in terms of % share but the markets themselves are small. As far as Vauxhall is concerned so far this year their sales are up just over 5% on 2013 but because the market has grown significantly their actual market share has slipped slightly, although Vauxhall always do better in the second half of the year mainly due to the replacement cycle of company cars and fleet sales. The Mokka made it into the top 10 in May for the first time but Corsa sales are suffering because of the overlap with Adam and to a lesser extent Agila. The new Corsa can’t come soon enough. And Opel sales in Germany have been reported as being discounted on average 25%, that is not sustainable or profitable. So the dilema is how to increase market share AND improve transaction prices – that’s a tall order and as said Opel’s competitors are not going to be standing still and within that timeframe Europe will also have some Chinese car makers to add to the problem for the first time.