European Auto Sector Recovery Slows in May -- Update

By Dow Jones Business News, 
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By Neetha Mahadevan

FRANKFURT--The recovery in demand for new cars in Europe lost momentum in May as registrations grew at their slowest pace in six months, casting doubts over the strength of the upswing.

New registrations, a proxy for sales, rose 4.5% in the EU to 1.09 million vehicles, the European Automobile Manufacturers' Association, or ACEA, said Thursday. It was the second-lowest number of cars sold in May since the group began collecting EU-wide data in 2003.

"The growth trend in the European new car market has weakened further in May, and is not expected to pick up in the coming months either," said Peter Fuss, auto industry expert at Ernst & Young.

Demand is still growing. Registrations increased for the ninth consecutive month, with all major markets contributing positively to the overall expansion of the EU market, except Italy, one the markets hardest hit by a slump in demand during Europe's financial crisis. In Italy, car registrations fell 3.8%, ACEA said.

The region's southern markets, Spain, Portugal and Greece, continued a strong rebound, reporting double-digit growth in demand for new cars, while registrations rose 7.7% in the U.K.

Germany, the EU's biggest car market, posted a 5.2% increase in May, while registrations in France rose 0.3% for the same period.

In the first five months, registrations grew 6.9%, suggesting that the turnaround remains intact, though the overall market remains 20% smaller than it was in 2008.

"Whilst the growth rate in May was not exceptional,...we anticipate a slow and gradual recovery as opposed to any 'V-shaped' market improvement," auto analysts at International Strategy and Investment said.

Among European car makers, Renault SA saw the strongest growth in May out of Europe's mass market players, with registrations up 19% on the year, followed by Volkswagen AG cars where sales rose 9.6% in the month. Premium brands performed slightly worse than the market, with BMW AG's car registrations down 2.2%.

"At a brand level, it is clear that new models and changeover is having an impact with Renault benefitting from new model cadence and both BMW and Daimler AG suffering some weakness as they see model changeover at Mini and the ageing of Smart leaving a negative effect," ISI's auto analysts said.

Among non-European manufacturers, U.S. car makers struggled to gain ground in European markets, with General Motors Co.'s car registrations declining 6.8% in May and Ford Motor Co.'s sales falling 2% in the month.

Write to Neetha Mahadevan at neetha.mahadevan@wsj.com

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This article appears in: International

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