Even as car sales across Europe have plummeted in recent years, automakers could count on Germans to buy with little discounting. Now, at least one dealer is resorting to Groupon Inc. (GRPN) coupons to boost sales.
AK Autoport Koeln GmbH, a dealer in the western city of Cologne, is offering a 99-euro ($130) Groupon voucher entitling buyers to a discount of 5,450 euros on a 2013 Ford Fiesta -- a price break of about 32 percent.
Auto discounts in Germany, which accounts for more than one in five car sales in Europe, climbed to their highest level in seven years in April, sapping profit margins for manufacturers, according to a monthly index by the Center for Automotive Research at the University of Duisburg-Essen.
“At the moment, nothing points to an easing of the discount situation,” said Ferdinand Dudenhoeffer, the center’s director. “Cars that couldn’t be sold in southern Europe are being pushed to Germany.”
Volkswagen AG (VOW3), Europe’s largest carmaker, yesterday reported a 26 percent drop in first-quarter operating profit. Daimler AG (DAI) said weaker results at Mercedes-Benz caused earnings before interest and taxes to tumble 56 percent. The declines show that the effects of Europe’s sovereign-debt crisis have spread beyond countries pushing through austerity measures.
“We are not out of the crisis in Europe,” Daimler Chief Financial Officer Bodo Uebber told reporters yesterday. “This is weighing on investments and consumer behavior.”
German carmakers had largely been insulated from Europe’s slump by a stable domestic market and strong operations in the U.S. and China. Those defenses are weakening after German car sales dropped 13 percent in the first three months of 2013.
“Markets were sluggish, especially in Europe, and not least in Germany” during the quarter, VW Chief Executive Officer Martin Winterkorn said yesterday.
Volkswagen will provide an update on its effort to sidestep the European slowdown and become the world’s largest carmaker at its annual shareholder meeting today in Hanover.
Ford Motor Co. (F)’s European pretax loss more than tripled to 462 million euros in the first quarter as the U.S. automaker moves to eliminate 6,200 jobs and close three production sites in the region. Ford’s cuts are part of industrywide plans to shut five plants.
Automakers will likely build 18.7 million cars in Europe this year, while factories in the region are capable of making as many as 26.1 million, according to researcher IHS Automotive. The risk is that manufacturers will continue producing to keep equipment and staff busy. Getting rid of those vehicles may entail deep discounts.
“Pricing in Europe is one of the biggest risks,” said Frank Biller, an analyst at LBBW in Stuttgart, Germany. “If the market continues to be difficult and one company starts cutting prices further, competitors might have to follow.”
In a sign of the tension in the industry, about a dozen police vehicles surrounded the main gate of the Paris headquarters of PSA Peugeot Citroen (UG) during its annual meeting yesterday, and shareholders had to use a side entrance.
Peugeot, Europe’s second-largest carmaker, reported yesterday that first-quarter sales fell 6.5 percent to 13 billion euros. The company is eliminating 11,200 jobs in France and closing a factory near Paris, where workers have staged strikes over the restructuring plans.
CFO Jean-Baptiste de Chatillon said Peugeot has managed to ease pressure to cut prices by reducing inventories. The French manufacturer and its dealers had 414,000 cars in stock at the end of the first quarter, the equivalent of 58 days of supply. That compared to 548,000, or 70 days, a year ago.
Still, Peugeot and rival Renault SA (RNO) had the highest incentives in Germany last month, with dealer discounts averaging 15.1 percent off the list price, according to trade publication Autohaus PulsSchlag. Industrywide incentives in Germany rose in March to an average of 12 percent from 11.1 percent a year ago, according to PulsSchlag.
The situation is similar in France, where sales tumbled 15 percent in the first quarter, according to ACEA, a European auto-industry trade group.
“Customers now need two weeks of reflection and try to negotiate the price three times before making their decision,” said Ayache Faycal, a salesman at a VW dealership in northern Paris. On top of the tough negotiations, “we have far fewer people coming into the store.”
In Italy, where car sales this year may fall to the lowest since 1996, Fiat SpA (F) is offering the convertible version of its 500 subcompact for the same price as the standard hard-top, the equivalent of a 3,500-euro discount. And General Motors Co. (GM)’s Opel is topping up other current promotions with a 1,000-euro rebate check.
In Germany, Autoport Koeln, which sells cars from various brands that it imports at a discount from dealers in other countries, turned to Groupon to widen its customer base and sell some of the Ford Fiestas it has in inventory. With more than a day remaining on the Groupon deal yesterday, it had sold 11 of the cars.
“Customers are certainly looking at the price,” said Fabian Schmidt, sales manager at the dealership. “But you can sell cars in this market if you offer the right deals.”