The Geneva Motor Show kicks off this week amid growing optimism for European automakers – but they're not popping open the champagne just yet.
Car sales in the region kicked off the first month of the year with a 6.7 percent increase over 2014 – the 17th straight month of gains in a row.
The European Central Bank's quantitative easing program is set to provide additional tailwinds for the sector, thanks to a weaker euro and an uptick in consumer sentiment. In another boon for the sector , the dramatic decline in oil prices is trickling down to lower prices at the pump, helping to drive demand for high-margin SUVs.
Despite the improving backdrop, manufacturers are keeping an eye on the uncertainty in Russia. Analysts expect the Russian market, once a high-growth haven, to slump further in 2015 after a 10 percent decline last year. The annual drop-off was exaggerated by a 24 percent dip in January after foreign brands rushed to raise prices on the back of the falling ruble.
"The size of the market contraction in Russia is the biggest wild card facing vehicle manufacturers across the European continent, if not the world, in 2015 and 2016," said Nigel Griffiths, chief automotive economist, IHS Automotive. The industry group expects Russian market sales to slump to just 1.8 million units in 2015, a 27 percent decline over last year and nearly 40 percent below the level in 2012. PwC, meanwhile, says the decline could be up to 35 percent.