News that PSA Peugeot Citroën was writing down its assets to the tune of €4.1bn in early February can hardly have made comfortable reading among other car makers hit hard by the continuing European financial crisis. In fact, the news came a few days after Volkswagen –  arguably one of the financially strongest European manufacturers – stated that it would be writing down the value of its assets by some €3.9bn.

The news would hardly have made comfortable reading in Turin. Car registrations in Italy suffered one of the largest falls in Europe last year among the larger EU nations. Car registrations fell by 19.9% in 2012 from 1,749,739 in 2011 to 1,402,089, according to data from ACEA, the European Automobile Manufacturers’ Association. That figure is almost one million fewer registrations than in 2007 (2,493,105).

There was no consolation in the figures for commercial vehicles either. Overall registrations were down by some 31.7% compared with 2011. Light CV registrations were down 32% from 170,672 in 2011 to 116,112. Heavy truck registrations over 3,500kg gross weight were down by 29.4% compared with 2011 from 19,474 to 13,741. A rapid reversal of such decline must be seen as extremely unlikely.

Not surprisingly, the Fiat/Chrysler group was the strongest performer in the 2012 Italian car market. According to data from the Italian Automobile Industry Association, ANFIA, the Fiat/Chrysler Group took a 29.6% share in 2012, worth some 415,018 registrations in 2012. This was more than twice the market share of second-placed VW with 13.2% (185,076) and PSA Peugeot Citroën in third place with 9.9% (138,806).

Commenting on the 2012 car market data, Andrea Badolati, managing director of ALD Automotive Italy, told IFW: ‘This market used to work around 2.3-2.4 million units. This year, it could land around 1.2 or 1.3 million units, so we are talking about a reduction of around 50%. To give you an idea, 1.2 million was the volume in Italy in 1960.’

Looking at the individual brands in 2012, data from UNRAE (Unione Nazionale Rappresentanti Autoveicoli Esteri), which represents distributors and dealers in Italy supplied by Alphabet, suggests that Fiat had a 21% share of the market with 294,454 registrations, VW an 8.1% share and 114,799 registrations, Ford a 7.1% market share and 100,528 registrations, Opel a 5.5% share and 78,487 registrations, with Lancia making up the top five with 5.06% and 71,420 registrations.

Of this total, UNRAE data suggests that business cars made up some 36.22% of the new cars sold in 2012, a total of 510,622. Some 49.3% of this total is accounted for by rental business, representing 17.84% of the total new car market. Since the new car market in Italy has contracted in 2012, it is no surprise that the business car market has also reduced – by 13.8% compared with 2011.

Commenting on the trends in the business car sector, Andrea Cardinali, chairman and managing director of Alphabet Italy, told IFW: ‘A general analysis of the car market in 2012 illustrates a general fall in purchases of cars both by private individuals (-22.8%) and companies under lease finance (-17.22%). However during 2012 the market share of business fleets went up slightly over the share of private individuals. Within this segment, 49% of registrations were for rental use and 51% were for companies. The increasing trend of the preference towards rental instead of company leasing has risen from 10.9% to 12.27%.’

According to JATO Dynamics, the most popular model in the business sector has been the Fiat Panda for some years, although the larger Grande Punto saw a steep increase in sales in the sector last year, whether this was for rental business, or attributable to large orders is not clear.

But an analysis of the long-term lease sector, provided by Alphabet, gives some indication. The Grande Punto took a 9.9% share of long-term lease car sales, 44% of the 2012 total for the model. One factor may have been the availability of new engines, as Andrea Cardinali of Alphabet suggests: ‘Even the demand for hybrids (with natural gas and petrol) and the Fiat TwinAir (a small petrol engine which weighs and emits less) has increased, and is in the top 10 of the most wanted lease cars.’ The TwinAir engine is available in both the Grande Punto and Panda, among other Fiat Group models.

Andrea Badolati at ALD suggests that the premium car sector is also strong, borne out by the third and fourth placing for the Audi A4 and BMW 3 Series. He suggests that the A3, A4, A5 and A6 all attract a strong following, as does BMW with Mercedes-Benz a little behind its German rivals.

We asked what kinds of cars tend to be favoured by business users. For Alphabet, it is summed up in three words – savings, eco-sustainability and quality. The economic situation has been the factor behind the changes. Cost control has driven demand for smaller engines and lower fuel consumption.

‘Size, it is true, goes down, but comfort and optional extras increase in many cases; from a flagship to a more compact car is less traumatic than you might imagine,’ says Andrea Cardinali of Alphabet. ‘And here is where the non-premium manufacturers find themselves unexpectedly at an advantage, while the premium brands must remodel their products and services to compete with the offer of the smaller makers.

‘The downsizing phenomenon also involves migration from premium brand manufacturers to lower categories. In this scenario BMW does not however seem to be suffering; the 3 Series actually represents half of the BMW cars in Italian fleets, it is in fourth place in the classification of long-term leases.’

Andrea Badolati at ALD says there has been a downsizing and downgrading for the business user. ‘What was usually around 3.0-litres is now around 1.8-litres.’

The trigger for the downsizing has been the continuing economic crisis in Italy. ‘The poor economic situation is the primary factor in putting the brakes on car sales,’ says Andrea Cardinali of Alphabet. ‘However, in 2012 other elements also had a negative influence: increases in fuel prices, highway tolls, insurance, difficulty in getting access to credit, the barrage of taxes and the strong fall in the ISTAT (Italian National Statistics) business and consumer confidence indicators.’

Mr Cardinali believes that it is time for a less punitive economic policy for businesses and users. With a general election looming at the time of writing, it is not clear if his wishes will be granted.

So how will the business car market in Italy develop in the next few years?

‘It will be difficult to maintain the levels of the 2012 market in the absence of fiscal measures which provide more reasonable levels of deductibility or at least better aligned with the other European countries, perhaps even offering incentives for businesses which decide to renew their car fleet,’ says Mr Cardinali. ‘The coming years will prove to be useful for all instruments and solutions which permit efficiency and optimisation of certain processes towards more economic, rational and responsible mobility, in line with the primary needs of businesses for timely monitoring of all cost items and for mastering all management indicators (mileage trend, length of contract, and global spending, emissions) of the fleet in view of Total Cost of Mobility. The challenges to be tackled in terms of mobility are growing, we are seeking successful solutions adapted to the future needs of businesses and modern society.’

Mr Cardinali believes that developments such as car-sharing, which Alphabet has introduced through its AlphaCity scheme based on long-term leasing, will gain in popularity and spread from Germany, France and the UK, where the scheme is already in operation.