Europe Car Sales Plunge 10% as Germany’s Decline Hurts VW

By Tommaso Ebhardt 

European car sales dropped 10 percent in March as declines at PSA Peugeot Citroen (UG),Ford Motor Co. (F) and Volkswagen AG (VOW) and a plunge in Germany put the industry on pace for the fewest annual deliveries in 20 years.

Registrations fell to 1.35 million vehicles last month from 1.5 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. First-quarter sales dropped 9.7 percent to 3.1 million cars.

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A row of Audi A8L automobiles, produced by Volkswagen AG's Audi brand, sit on display outside the company's headquarters ahead of the earnings news conference in Ingolstadt, Germany. Photographer: Guenter Schiffmann/Bloomberg

A recession stemming from the European sovereign-debt crisis has led to 12 percent unemployment in the 17 countries sharing the euro, the highest rate since records began in 1995. Four of Europe’s five biggest car markets shrank last month, with the steepest drop at 17 percent in Germany, the region’s largest economy and home to producers such as VW andBayerische Motoren Werke AG. (BMW) The region’s sales declined for an 18th consecutive month, the ACEA said.

“The western European passenger-car market is on track this year to hit levels last seen in 1993, and Germany seems to be in a free-fall,” Max Warburton, an analyst at Sanford C. Bernstein Ltd. in Singapore, wrote in a report to clients yesterday. “While unit profitability in Germany is not nearly as high as China, it’s still a critical driver of German carmakers’ earning and the current trend is quite disturbing.”

Peugeot Drop

European sales by Paris-based Peugeot, the region’s second- biggest carmaker, dropped 16 percent. Deliveries at Wolfsburg- based Volkswagen, the European market leader, dropped 9.3 percent, with the namesake brand posting a 15 percent decline.

Sales in the region by Dearborn, Michigan-based Ford plunged 16 percent in March. The manufacturer, which is forecasting a loss of $2 billion in Europe for 2013, won approval on March 15 from workers at its plant in Genk, Belgium, of severance terms for when the factory closes in 2014.

Ford and Peugeot are among auto manufacturers planning job cuts and factory shutdowns inEurope in coming years in response to the vehicle-market decline. General Motors Co. (GM), which is scheduled to shut one of its Opel brand’s five car plants in Germany next year, has also budgeted 4 billion euros ($5.26 billion) in investments in Europe through 2016 to upgrade equipment and add models.

Registrations in western Europe, which excludes countries that have joined the EU since mid-2004, fell 10 percent to 1.28 million vehicles in March.

Consumer Confidence

“Ongoing difficulties have led to lower-than-expected industry sales during the first three months,” Allan Rushforth, head of Seoul-based Hyundai (005380) Motor Co.’s European business, said in an e-mail. “We anticipate this trend will continue through the second quarter, before an improvement in consumer confidence helps to push up sales in the second half of 2013.”

Full-year car sales across Europe may fall as much as 7 percent, according to Peter Fuss, a partner at Ernst & Young consulting company’s Global Automotive Center in Frankfurt.

Business confidence and an index in consumers’ willingness to buy fell in Germany last month following a botched bank bailout in Cyprus. The International Monetary Fund reduced its global full-year economic-growth forecast yesterday, predicting the euro area will contract 0.3 percent compared with a 0.2 percent decline foreseen early this year.

Worsening View

“The market is getting worse day by day and, for the first time, I can’t see the bottom,” Fiat SpA (F) CEO Sergio Marchionne told reporters at the carmaker’s annual meeting on April 9. A decline in European sales “would be worse than the forecasts we indicated in January as our base for 2013 targets.”

GM’s European sales fell 13 percent in March, led by a 28 percent drop at the Chevrolet brand. Sales at GM’s Opel and Vauxhall divisions declined 10 percent. Among Asian carmakers, sales in Europe plunged 17 percent at Toyota Motor Corp. (7203), the world’s biggest auto manufacturer, and 10 percent at Hyundai.

Renault SA (RNO) posted a 9.7 percent drop in European deliveries. The manufacturer, based in the Paris suburb of Boulogne-Billancourt, is introducing the Captur multipurpose vehicle this month in an effort to revive demand.

European sales by Turin, Italy-based Fiat SpA fell 1.2 percent because of declines at the Lancia, Chrysler and Alfa Romeo divisions. The namesake Fiat brand posted a 7.7 percent increase after introducing the 500L wagon. The new model helped slow the industrywide sales drop inItaly to 4.9 percent in March from a 17 percent plunge in February. Last month’s figures were also helped by a comparison with a year earlier, when a nationwide truckers’ strike halted deliveries.

BMW, the world’s biggest luxury-car producer, sold 4.7 percent fewer vehicles in Europe last month. Daimler AG (DAI), whose Mercedes-Benz ranks third in global luxury-model sales after BMW and VW’s Audi brand, posted a 1 percent European sales decline, with registrations at the two-seat Smart division dropping 16 percent and demand at Mercedes rising 0.8 percent.

To contact the reporter on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

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