By Andreas Cremer and Laurence Frost
FRANKFURT (Reuters) - Europe's car market is bottoming out after five years of falling demand, but high unemployment and weak bank lending suggest its recovery will be long and slow, executives at the Frankfurt car show said.
Automakers have been hammered by Europe's prolonged economic downturn, with sales falling sharply and profits suffering even more because of overcapacity.
But broad signs of stabilization - even in some of the region's hardest hit economies like Italy and Spain, where car sales have plunged some 50 percent since the 2008 financial crisis - are raising hopes that better times are on the way.
"The European market has bottomed out. It now appears to be stabilizing at a very low level," Volkswagen (VW)
"A recovery will take some time and depend on the economic and political environment," he cautioned. "Don't forget that unemployment is at the highest level in a long time. Banks don't always offer loans that are favorable to industry."
A bounce in exports and spending pulled the euro zone out of recession in the second quarter, in the first signs of revival after the bloc's longest slump.
But economists remain cautious. Unemployment is at a record high of 12.1 percent across the 17-country bloc and car sales fell in Germany, France, Italy and Spain in August, casting doubt over consumers' willingness to spend.
PSA Peugeot Citroen
VW, Europe's biggest carmaker, also struck an upbeat tone on sales, saying it was aiming to sell 9.5 million cars this year, up from 9.3 million in 2012, while German rival BMW
The comments helped to push Peugeot shares, one of Europe's most shorted stocks, more than 7 percent up as traders scrambled to unwind their bets against the company.
VW shares also climbed more than 3 percent, while BMW shares advanced nearly 2 percent.
PARTIAL RECOVERY TO TAKE YEARS
While car sales in western Europe appeared to be steadying at around 13-13.5 million units this year, that was still down about 5 million from their peak and there was no prospect of returning to those highs anytime soon, he told Reuters.
"Our view is that over the next five years we see a modest recovery, about 20 percent of the industry from the base," he said in an interview with Reuters Digital Video.
Rupert Stadler, chief executive of VW luxury brand Audi, also said it would take another one or two years before the European car market recovery picked up speed.
And while Carlos Ghosn, the head of Renault
VW finance chief Hans Dieter Poetsch, meantime, told CNBC the European car market was still suffering from overcapacity, which would keep downward pressure on prices.
While all carmakers have suffered, the pain has not been evenly spread: German manufacturers VW, BMW and Daimler
That has allowed them to invest more than rivals with greater exposure to southern Europe, such as Peugeot, Renault and Fiat
(Writing by Mark Potter; Editing by Sophie Walker)