July 15, 2010. Copyright 2010, Graphic News. All rights reserved

Slide in Europe's car sales begins as buyers fear economic weakness
By Neil Winton

LONDON, July 15, Graphic News:  Car sales in Western Europe began to slide in June as the impact of government incentive schemes faded and fears of a double dip economic recession gripped potential buyers across the continent.

Experts believe that sales in the second half of the year will dive, although the downturn will not be quite as bad as feared earlier.

According to British newsletter Automotive Industry Data (AID), sales in Western Europe were down 6.4 percent in June, though managed a small, 1.5 percent increase over the first half of the year.

Sales forecasts for the year as a whole now average around a dip of eight percent, compared with a consensus of close to 10 percent earlier this year.

Germany, Europe's biggest market, was the worst performer, down 32.3 percent in June and off 28.7 percent in the first half of the year, AID said. Germany was the first country in Europe to instigate a cash-for-clunkers scheme. Its massive, five billion euros incentive scheme to persuade buyers to dump old bangers and buy new cars expired just under a year ago, and the market is now suffering from the after-effects.

Toyota of Japan continued to feel the impact of bad publicity about the safety of its cars, and its sales fell 11.5 percent over the first six months. Other laggards included Volkswagen of Germany, the market leader. Its sales, including the Audi, Skoda, and SEAT subsidiaries, slipped 1.2 percent over the half year. Renault of France was a standout winner with sales up 22.2 percent, thanks to its Megane and Scenic range.

Prospects for the second half of 2010 are poor, not only because scrapping incentives are expiring, but European economies will weaken as governments slash spending to cut budget deficits.

However, the pace of the downhill action is not likely to be as bad as initially feared. Renault said the European car market would fall between seven and nine percent this year, compared with its previous forecast of a 10 percent dip.

Deutsche Bank also reined in its earlier negative forecast for Western Europe, but not by much. The bank added 300,000 sales to its forecast for 2010, taking it to 12.6 million, or a fall of eight percent. The forecast implies that the industry is battening down the hatches for a squall rather than a storm.

Automotive consultancy J.D.Power is more optimistic than most, retaining its prediction for the year at minus 5.7 percent for Western Europe, although this hides good news for potential buyers who aren't cowed by poor economic prospects; prices will fall.

"The underlying downshift in demand for vehicles remains, in our view, largely unavoidable. Discounting has been employed, liberally in some cases, in order to mitigate the impact of incentive withdrawal. This has been especially true in Germany but is taking place more generally in a number of countries," J.D.Power analyst Pete Kelly said.
/ENDS