In the report (see PDF below), Dean Bowkett, technical director and chief editor at EurotaxGlass’s Group, finds that European new vehicle sales are still at a fragile stage of recovery, with high discounts, sub-vented finance and self-registrations playing a key part in the growth in most markets.

He added that capacity utilisation appears to now be at rock bottom and should start to improve from 2015 onwards, hitting around 80% of maximum capacity by 2020 and 85% of straight time capacity.

There have been nine straight months of rising new car sales in the EU28 & EFTA3 up to May 2014, but production is still outstripping sales across cars and light commercials by around 3.5% pa.

For the full year, new car sales forecasts look set to hit 13.2 million for the EU28 and EFTA3 based on current trends, with a lowest estimate of 12.9 million vs. 12.34 million in 2013.

The report also highlighted that the Spanish PIVE scrappage scheme has been extended again and the Italian scrappage scheme to incentivise the sale of “green” cars like those running on gas saw the €63m pot launched on 6th May running out in almost a matter of days.

Other key factors include that used cars continue to be in short supply but new vehicle discounting continues to depress younger used values. And used buyer demand continues to focus on a combination of economy and practicality with small SUVs being the most popular segment in most markets.

The firm adds that its three-year RV forecast assumption remains generally positive with RVs rising during 2014 and 2015.

Mr Bowkett said for the UK trade prices are starting to weaken a little and the firm expect values to soften during the remainder of 2014.

However whilst there are some small signs of economic improvement EurotaxGlass’s expects the overall situation in France to continue to result in downward pressure on used values resulting in values falling by 1-2% p.a. especially in the dominant diesel segment.

Giving his outlook for the next three years, Mr Bowkett said: ‘An increase in exports and the recovering European new vehicle sales market has eased some of the immediate pressure on most automotive OEMS although falls in markets like Russia and Brazil create new issues for some over the next year or two.’

He added that capacity utilisation remains well below profitable levels and there is little chance of this changing before the end of the decade.

The economic outlook across the EU is improving and strengthening but there remain pockets of weakness and exposure both within the region and with export markets, which could quickly spread and jeopardise any recovery.

Meanwhile the latest estimates put new car sales in the EU28 and EFTA3 as rising 3.9% in 2014, to 12.8 million, with further increases of 2.9% and 2.7% in 2015 and 2016.

Mr Bowkett said that a 6.5% rise is quite feasible for this year putting new car sales at almost 14m by 2016, which would still be 13% lower than 2007 as OEMs seek to clear out current the over production levels

He added that the 1-5 year old car parc of LHD vehicles has a further 7% to fall over the next two years but there will not be the sort of bounce-back seen in the RHD markets.

The risk of the UK market overheating is gathering momentum with double digit growth in new car sales in the year to May 2014, rapidly rising house prices and interest rate rises in the very near future if the trends continue at the current rate 2016-17 could prove to be a challenging period.

Despite all the hype alternative powertrains continue to fall short of OEM expectations with at best muted demand from private buyers however the notable exception is for gas powered vehicles in Italy which is a trend that is going to continue.

He also said that SUVs and crossovers remain the used and new vehicle of choice for most buyers whilst modular platforms will enable new niche products to be developed in the future – however he said that this might end up confusing existing car buyers rather than attracting new ones.