European Car-Sales Drop Accelerates on Decline in Germany

Europe’s car-sales contraction accelerated in February as a steepening decline in Germany, the region’s biggest market, hurt previously resilient Volkswagen AG (VOW), Bayerische Motoren Werke AG and Daimler AG.

Registrations dropped 10 percent to 829,359 vehicles last month from 923,553 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Two-month sales fell 9.3 percent to 1.75 million cars. The decline in January amounted to 8.5 percent.

Unemployment is rising as a recession deepens in the 17 countries using the euro. General Motors Co., Fiat SpA (F) and PSA Peugeot Citroen (UG) posted the biggest sales drops in Europe last month. Declines were exacerbated in Italy, the region’s third- biggest car market, by an inconclusive parliamentary election, while government incentives in Spain failed to stem a slide in that country’s deliveries.

“This is as lousy as expected,” Gaetan Toulemonde, an analyst at Deutsche Bank AG in Paris, said by phone. “We won’t see any sign of recovery before the second half.”

The ACEA reports figures for the 27-nation European Union plus Switzerland, Norway and Iceland. Deliveries in western Europe, which excludes countries that have joined the EU since mid-2004, plunged 10 percent to 774,415 vehicles in February.

‘Mixed Picture’

“Economic and political uncertainties, combined with different carbon dioxide-based vehicle taxation policies across Europe result in a very mixed picture for the car market,” Allan Rushforth, senior vice president and chief operating officer of Seoul-based Hyundai (005380) Motor Co.’s European business, said in a statement.

Four of Europe’s five biggest automotive markets shrank last month, with the steepest plunge in Italy at 17 percent. Deliveries in Germany dropped 11 percent, compared with an 8.6 percent decline in January. Car sales in Spain fell 9.8 percent in February, versus a 9.6 percent drop the previous month. The U.K. market increased 7.9 percent.

Volkswagen, Europe’s biggest carmaker, posted a 7.2 percent decline in sales in the region last month, led by a 12 percent drop at the Skoda brand. The main VW marque sold 9.9 percent fewer cars while registrations fell 3.8 percent at Audi, the world’s second-largest maker of luxury vehicles. Wolfsburg, Germany-based Volkswagen’s group European sales last year fell 1.1 percent, less than the 7.8 percent market contraction.

BMW’s Reversal

European sales in February fell 2.8 percent at Munich-based BMW, the world’s biggest luxury-car producer, counter to a 6.4 percent increase the previous month. Daimler (DAI), whose Mercedes- Benz ranks third among luxury-auto brands, reported a 1.7 percent decline in European sales last month, compared with a 3.7 percent gain in January.

Sales in Europe fell 13 percent at Paris-based Peugeot, which ranks second in deliveries in the region, and 8.6 percent at French competitor Renault SA. (RNO) Turin, Italy-based Fiat posted a 16 percent drop in European sales.

Demand for cars in Europe is set to fall for a sixth consecutive year in 2013, according to IHS Automotive research company. Full-year sales declined to a 17-year low in 2012.

German Discounting

Dealers in Germany reduced car prices by an average 11.7 percent last month, versus 11.5 percent a year earlier, with discounting at Fiat widening to 16.5 percent of the list price from 12.7 percent, according to Autohaus PulsSchlag trade magazine. Peugeot, Citroen and Renault’s combined average price cut in Germany was 13.5 percent in February, it said.

Renault Chief Executive Officer Carlos Ghosn is among industry leaders saying governments may need to consider reviving incentives to encourage trade-ins of older cars for newer vehicles. Fiat CEO Sergio Marchionne, who holds the ACEA’s rotating presidency, has countered that “natural” demand is preferable.

Peugeot and Renault are each planning 17 percent cuts in their French workforces, and have reached agreements with unions within the past week on severance packages. Renault pledged in the deal signed March 13 to keep all its plants in France open until at least 2016 in exchange for increased worker productivity. Peugeot’s accord, reached yesterday, governs terms for the shutdown of its plant in the Paris suburb of Aulnay.

Plant Shutdowns

Other carmakers announcing European job cuts and plant closings since mid-2012 include GM (GM), Dearborn, Michigan-based Ford Motor Co. (F) and Tokyo-based Honda Motor Co. (7267)

GM’s group sales in Europe last month dropped 20 percent, led by a 38 percent decline for the Chevrolet brand. The Detroit-based company’s Opel division reached an agreement on March 15 with workers at three of its German plants on a pay freeze through 2015 as part of a profit-restoration strategy.

Opel also plans to stop making cars at its plant in Bochum, Germany, in 2016, where the assembly line employs about 3,100 workers. The shutdown would be the first of a German auto plant since World War II.

European sales by Ford fell 21 percent in February. 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.

Hyundai was the only carmaker among the top 10 sellers in Europe to post a sales gain in the region last month, with a 1.4 percent increase. Toyota Motor Corp. (7203), the world’s largest auto manufacturer, sold 7.8 percent fewer cars.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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