Europe Car Sales Continue to Sink - Analyst Blog


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Car sales in Europe continued to slow down ever since October last year owing to lower consumer confidence on the heels of a weak economy triggered by the sovereign-debt crisis in Euro zone. Free road tax, steep discounts and other incentives by automakers could not save the industry from the slump.

According to European Automobile Manufacturers' Association or ACEA, car sales in the 27-nation European Union fell 2.8% to 1.20 million units in June and 6.8% to 6.64 million units in the first half of the year.

Among the major markets (France, Germany, Italy, the Netherlands, Spain and U.K.), Germany, the Netherlands and U.K. showed improvement. Car sales rose 2.9% in Germany to 296,722 units, 52.1% in the Netherlands to 76,813 units and 3.5% in the U.K. to 189,514 units. Meanwhile, it declined 0.6% in France to 208,909 units, 24.4% in Italy to 128,388 units and 12.1% in Spain to 73,258 units.

Volkswagen AG ( VLKAY ), the largest car manufacturer in the continent, posted a 2.8% rise in sales to 286,109 units in June and a 1.5% fall to 1.59 million units in the first half of 2012.

Sales at PSA Peugeot Citroen ebbed 8.6% to 148,172 units in the month and 13.9% to 808,660 vehicles in the period under study. The decline prompted the company to announce 8,000 job cuts and a plant shutdown last week.

Among the U.S. automakers, General Motors Co. ( GM ) posted an 8.8% fall in sales to 107,160 cars in June, translating into a 10.8% decline to 560,934 units in the 2012-first half. Meanwhile, sales at Ford Motor Co. ( F ) plunged 16% to 124,200 cars in the month and 9.6% to 733,900 cars in the period under review.

Automakers are still concerned about car sales in Europe in the near term due to the continuous negative impact from the debt crisis. ACEA has projected a 7% fall in sales, hitting a 17-year low, for 2012 in the continent.

Last month, light vehicle sales in the U.S. showed a marked recovery approaching the pre-recession level amidst weak labor market and dipping consumer confidence. According to Autodata Corp., seasonally adjusted annual rate (SAAR) during the month was 14.1 million vehicles, up 22% from 11.6 million vehicles in June last year and close to 16.1 million vehicles in 2007 before the economy was hit by recession. With this, the U.S. auto industry also completed the best first half of the year since 2008.

The key factors that drove auto sales in the U.S. include lower gas prices, low interest rates and above all strong pent-up demand. Besides, merchandising promotions (such as zero-interest loan) and price incentives ahead of Independence Day also enticed consumers to buy new vehicles. Most of the major automakers posted double-digit rise in sales.

FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
(VLKAY): ETF Research Reports
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