Carmakers fear emerging market slump

4 March 2014 Last updated at 21:59

Volkswagen and Renault warn of emerging market slowdown

Car sales in some emerging markets such as India have been declining

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European carmakers Volkswagen and Renault have warned of a slowdown in demand from emerging markets.

Jerome Stoll, Renault's sales chief, said the company was seeing "headwinds" from its newer markets, despite sings of recovery in European sales.

Emerging markets have driven growth in the car industry since the financial crisis.

But some have seen slower economic growth and volatility in their currencies in recent months.

"While Europe is showing some signs of recovery, we are at the same time seeing some headwinds from emerging markets," Mr Stoll said, speaking at the Geneva Motor Show, according to Reuters.

Ukraine crisis

Meanwhile, German carmaker Volkswagen also cited concerns over the ongoing crisis in Ukraine.

"We're a major trade partner of Russia and are looking at the Ukraine and Russia with concern," said the firm's chief executive, Martin Winterkorn.

There is concern that instability in Ukraine may encourage investors to move away from investing in riskier developing economies in favour of safe havens such as gold and government bonds.

Analysts warn that could weaken emerging market currencies, making imports more expensive and hurting car imports and sales as a result.

Some emerging economies have already seen their currencies decline over the past year.

"Some countries have seen their currencies devalue by 20, 30 or 35%." said Christian Klingler, sales chief at Volkswagen.

"That always has consequences... very strong consequences if one doesn't produce locally."

Growing demand from China has seen it become the world's biggest car market

China factor

But despite these concerns some executives were upbeat about the overall growth prospects of the sector.

They cited the continued recovery in the US as well as rising demand from China - the world's two biggest car markets - as being key drivers in the near term.

"We have seen the levelling out in western Europe over the last year and the very first sign that it can become stronger now," said Ralf Speth, the chief executive of Tata Motors owned Jaguar Land Rover.

"We're seeing the US recovering more, and we still see a very solid China," he added.