Blog of RENAULT NISSAN Alliance

In his latest LinkedIn Influencers post, Renault-Nissan Alliance CEO Carlos Ghosn shares his view on the recovering European economy, the challenge of evolving consumer needs, and how companies must respond to this new paradigm. Read his post directly on LinkedIn here.

All signs point to Europe’s economy finally emerging from the long, dark tunnel of the double-dip recession that began in 2008. This time, I believe, we can expect to see a sustained recovery.

But it’s also a recovery that will look and feel considerably different from previous economic cycles in Europe – in ways that will profoundly affect consumer products companies.

Europe’s recovery from the “Great Recession” will be far more gradual, even more so than the recovery already well underway in the United States.

The European Commission’s spring economic forecast estimates real GDP growth at a modest 1.6 percent in the European Union this year. The recovery appears more regionally balanced, but persistent challenges remain in Italy, Ireland, Greece and Portugal.

Europe also faces another daunting challenge: Young people have been particularly hard hit by unemployment, and that situation is not expected to improve significantly anytime soon.

Consider: Nearly 43 percent of youths under 25 are unemployed in Italy. In Spain, that figure is 54 percent, and in Greece it’s 57 percent. An entire generation of consumers – people who would otherwise be spending discretionary income on cars, homes and appliances – is being forced to embrace austerity.

Instead of entering the workforce, this generation is staying in school longer. Instead of buying homes, they live with their parents. Instead of buying new cars, they buy used.

The situation exists in the United States as well, but with a different twist. While the job situation is less severe there, college graduates are entering the workforce burdened with massive student-loan debts – debts that will take a decade or more to pay off.

For this generation, austerity and frugality have become the norm, not just a temporary downside of an economic cycle.

And this has major implications for consumer product industries like autos.

It’s critical that companies listen and address this generation’s need for value, rather than pushing these frugal consumers to the most expensive products they can afford. Instead of over-engineering, companies need to simplify, minimize cost and maximize value.

This approach is what has made Dacia, which this month celebrates its 15 anniversary under Renault ownership, the fastest-growing car brand in Europe. People see Dacias as a “smart buy.”

Despite a weak market, Dacia sales in Europe last year were up nearly 26 percent, with France and Germany leading the way. At the same time, we have been increasing the value of all vehicles in the Renault and Nissan lineups through what we call “frugal engineering,” allowing us to offer people more value for less money.

The European Commission’s spring economic forecast estimates real GDP growth at 1.6 percent in the European Union this year, rising to 2 percent in 2015.

This, of course, is good news for car manufacturers, who saw strong sales growth in the first four months of this year. Renault Group sales in Europe increased 15.2 percent in April. Nissan’s European sales improved 16.7 percent, following a March that set a single-month record for the brand.

After six years of the worst economic downturn since World War II, Europe finally is coming out of its dark tunnel. We can see economic daylight again.

But only those companies that truly understand the long-term implications of a generation forced to embrace austerity stand a chance of prospering in this market; those that do not face a bumpy road ahead.

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