European Car Sales Fall to 20-Year Low Amid Unemployment

European car sales fell to a 20-year low in May as record joblessness caused by a recession in the euro area reduced demand at PSA Peugeot Citroen (UG), Renault SA (RNO), Fiat SpA (F) and General Motors Co. (GM)

Registrations dropped 5.9 percent to 1.08 million vehicles from 1.15 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. The figure was the lowest for the month since 1993, said Quynh-Nhu Huynh, the group’s economics director. The ACEA compiles data for the 27-nation EU plus Switzerland, Norway and Iceland.

Peugeot, Renault, Fiat and GM’s deliveries fell at least 10 percent in the region last month as price cuts failed to attract buyers. European political leaders are seeking ways to revive a shrinking economy weighed down by the sovereign-debt crisis, with unemployment in the 17 countries using the euro reaching 12.2 percent in April.

“We have to wait at least five years until the car market will basically recover,” Ferdinand Dudenhoeffer, director of the Center for Automotive Research at University of Duisburg-Essen in Germany. “That means that the debt crisis in southern Europe will deepen and last” for awhile.

Auto-industry executives are forecasting that the European car market will shrink a sixth consecutive year in 2013, with a possible recovery starting by the final quarter. Maxime Picat, head of the Peugeot brand, reiterated a prediction on May 22 that industry sales in Europe will fall 5 percent this year.

Photographer: Alexander Zemlianichenko Jr./Bloomberg

Registrations in the 27-member EU dropped 5.9 percent to 1.04 million vehicles from 1.11 million cars a year earlier, reaching the lowest level for the month since 1993, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Close

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Photographer: Alexander Zemlianichenko Jr./Bloomberg

Registrations in the 27-member EU dropped 5.9 percent to 1.04 million vehicles from 1.11 million cars a year earlier, reaching the lowest level for the month since 1993, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement.

Record Recession

Group European registrations at Paris-based Peugeot, the region’s second-biggest carmaker, dropped 13 percent in May. Renault (RNO), based in the Paris suburb of Boulogne-Billancourt, reported a 10 percent drop. European sales fell 11 percent at both GM and Turin, Italy-based Fiat.

The euro region’s six-quarter recession, the longest since the common currency was introduced in 1999, deepened in the first three months of the year as investment and exports plunged. The European Central Bank sees the currency bloc’s economy shrinking 0.6 percent this year.

Four of Europe’s five biggest automotive markets shrank in May. Deliveries in Germany dropped 9.9 percent, compared with an 3.8 percent increase in April. Sales declined 10 percent in France, 8 percent in Italy and 2.6 percent in Spain. Demand in the U.K. rose 11 percent.

Shrinking Market

“The main difficulty is that the U.K. market is the only one that supports European demand because the German one is worse than expected,” said Thomas Besson, a Paris-based analyst at Kepler Capital Markets. “That being said, consumer confidence is improving everywhere in Europe except in France and Italy, and this is very encouraging.”

Western Europe’s market will probably shrink to about 12 million vehicles in 2014, a 29 percent decline from the pre-crisis peak, and may stagnate at that level for the foreseeable future, consulting company AlixPartners said in a statement. High youth unemployment, an aging population and the declining value of the car as a status symbol indicate the drop in demand is structural, Managing Director Elmar Kades said.

Capacity utilization at European automotive factories is currently about 67 percent, according to estimates from LMC Automotive, which provides industry analysis.

“Given current production levels and the worldwide demand for European vehicles, stocks are still too high in the region and are likely to remain too high at the end of the first half,” said Denis Schemoul, a Paris-based IHS Automotive analyst.

Investor Confidence

Still, investor confidence in Germany, Europe’s largest economy, rose in June amid signs its recovery is gathering pace. The ZEW Center for European Economic Research in Mannheim said today that its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 38.5 from 36.4 in May.

Elsewhere in the EU, U.K. inflation accelerated more than economists forecast in May as a record jump in air fares for the month helped extend its persistence above the Bank of England’s 2 percent target.

The euro-area recession has increased pressure on the bloc’s leaders and the ECB to find ways to spur growth.

The ECB, which cut its benchmark interest rate to a record low of 0.5 percent last month, is considering further non-standard monetary policy tools and will deploy them if circumstances warrant, President Mario Draghi said today.

Charging Lenders

“We will look with an open mind at these measures that are especially effective in our institutional setup and that fall within our mandate,” Draghi said in Jerusalem. Draghi has in recent months held out the possibility of charging lenders to hold cash at the Frankfurt-based central bank by introducing a negative deposit rate.

The euro fell as much as 0.3 percent to $1.3326 after Draghi’s comments. It later reversed its decline to trade at $1.3378, up 0.1 percent, at 12:08 p.m. in Frankfurt.

In Asia, Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.

New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics data showed today in Beijing.

Restoring Profit

GM’s European sales drop last month was propelled by a 23 percent plunge at the Chevrolet brand, while Opel and its U.K. sister division Vauxhall posted an 8.4 percent decline. Detroit-based GM, seeking to restore profit in Europe after accumulating $18 billion in losses in the region since 1999, is reorganizing in response to the car-market drop with plans to shutter a German plant and freeze pay for workers through 2015.

Europewide sales by Dearborn, Michigan-based Ford Motor Co. (F) fell 0.5 percent in May. The manufacturer, which is forecasting a loss of $2 billion in Europe for 2013, said this week that it’s counting on new models such as the EcoSport compact sport-utility vehicle to help reduce reliance on low-margin sales to rental-car companies in the region.

“Carmakers like Opel, Ford Europe and Peugeot Citroen will have a tough time in Europe in the next few years, especially Opel, which is just concentrating” on the region, Center for Automotive Research director Dudenhoeffer said.

Volkswagen AG (VOW3), Europe’s biggest carmaker, posted a 2.8 percent decline in sales in the region last month, led by a 7 percent drop at its namesake brand. The Audi division, the world’s second-largest maker of luxury vehicles, sold 3.9 percent fewer cars.

Global Leader

European group sales at Stuttgart, Germany-based Daimler rose 0.5 percent as the Mercedes-Benz division, the world’s third-biggest luxury-car manufacturer, posted a 2.6 percent increase, bolstered by demand for the A- and B-Class compacts and CLA four-door coupe. Registrations at the Smart two-seat car brand dropped 15 percent.

Bayerische Motoren Werke AG (BMW), the global leader in luxury-vehicle sales, sold 6.6 percent fewer cars in Europe in May. Demand dropped 7.3 percent at the BMW brand and 3.4 percent at the Mini small-car unit. Toyota, the world’s biggest carmaker, posted a 5 percent decline in European sales, dragged down by a 33 percent plunge at its Lexus premium brand.

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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