As a significant sector in the European economy, with significant employment, investment,
research and development and a strong multiplier effect, attention needs to be paid to ensuring
the continuation of a strong European automotive industry.

As part of the Commission’s modern industrial policy, the CARS 21 process (originally
launched in 2005) aims “to make recommendations for the short-, medium-, and long-term
public policy and regulatory framework for the European automotive industry that enhances
global competitiveness and employment while sustaining further progress in safety and
environmental performance at a price affordable to the consumer.”

Creating stimulating framework conditions, which take full account of business realities
becomes all the more important in light of the current overall downturn in the global
economic environment and the consequent negative effect on consumer confidence. The
ongoing credit crisis has reached the mainstream sectors of the economy and is having a
highly detrimental impact on the vehicle market. Given that motor vehicles are one of the
most important consumer goods in terms of total household expenditure the demand for cars
is highly correlated with the general business cycle. The current economic situation is
therefore having an adverse impact on the sales of new vehicles in Europe which, by
extention, further complicates the situation with regard to manufacturing capacity utilisation.
The European Automobile Manufacturers Association reports that demand for new cars in
Europe decreased by 7.3% in July, 15.7% in August and stalled to their lowest level in
September since 1998. In the first three quarters of 2008, 4.4% fewer cars were registered in
the European Union than over the same period in 2007. Lower sales and an unfavourable
economic environment in turn translate into reduced margins and profitability, putting
pressure on employment and limiting the possibility of increasing R&D budgets.

The strategies pursued and actions undertaken by individual companies largely determine the
ability of the automotive industry to face the challenges of a changing world. The role of
public policy is to create an environment in which industry can thrive. Public policy also has
to address concerns of general interest: these mainly relate to regulating the market, protecting
the health and security of citizens and safeguarding the natural environment. Public policy
should be predictable while correctly reflecting the increasingly complex demands of society
and anticipating trends in world markets as well as taking into account the overall economic
situation and its implications for the automotive industry.

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