Europe June Car-Sales Drop Slows on Volkswagen Price Cuts

European June Car-Sales Drop Slows on Discounting by Volkswagen
Volkswagen AG vehicles. Photographer: SeongJoon Cho/Bloomberg

European car sales fell at the slowest rate in eight months as price cuts by Volkswagen AG and Renault SA helped counter the effects of the region’s sovereign-debt crisis and unemployment.

Registrations in June declined 1.7 percent from a year earlier to 1.25 million vehicles, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. First-half sales fell 6.3 percent to 6.9 million cars.

The European auto market has shrunk for nine consecutive months, and the ACEA is forecasting a 17-year low for full-year sales. The decline has prompted PSA Peugeot Citroen and General Motors Co.’s Opel unit to announce the first French and German car-plant shutdowns in decades. The drop in June was moderated by sales growth at Volkswagen and Bayerische Motoren Werke AG and slower declines at Peugeot and Renault.

“We see large rebates in the German market,” including price cuts of about 24 percent on Volksagen’s Golf, Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, said by phone. VW is set to unveil a new version of the model later this year.

The ACEA compiles sales figures from the 27 European Union countries plus Switzerland, Norway and Iceland. The market’s decline in June was the slowest since October, when the extended drop began. Among the five biggest markets, Italy’s registrations plunged 24 percent in June, pushing the six-month drop to 20 percent, while Spain’s contracted 12 percent, leading to an 8.2 percent first-half drop.

German Growth

French car sales declined 0.6 percent in June, while registrations rose 2.9 percent in Germany, Europe’s biggest auto market, and 3.5 percent in the U.K., the ACEA said.

Carmakers’ “large” rebates in Germany, which averaged 11.9 percent in June, are “a clear sign of market weakness,” Dudenhoeffer wrote in a June report on auto pricing. “The uncertainties about the debt crisis in southern Europe are causing private car purchasing to stall.”

The ACEA forecast on June 6 that industry sales in Europe will shrink 7 percent this year to the least since 1995 and 21 percent below the 2007 peak.

Renault, France’s second-biggest automaker, said on June 11 that it doesn’t expect Europe’s car market to match peak 2007 figures until 2018. The company is still planning to increase deliveries globally because of growth outside the region and the introduction of new models. Renault’s European sales in June declined 3.7 percent to 114,964 cars, leading to a 17 percent six-month drop.

Fiat Capacity

Fiat SpA will shut a plant, its second such move after closing a factory on the island of Sicily in 2011, unless the Turin, Italy-based automaker can come up with an economically viable plan to use excess capacity to build cars for North America, Chief Executive Officer Sergio Marchionne said July 3. Fiat’s June sales fell to 79,927 cars in Europe, with the monthly and first-half declines both at about 17 percent.

Peugeot’s reorganization includes reducing its workforce by 6.7 percent and stopping production by 2014 at its factory in the Paris suburb of Aulnay. The Paris-based manufacturer’s credit-default swaps reached a record high yesterday, signaling a 51 percent probability of default within five years. Peugeot’s European sales in June fell 8.3 percent to 151,686 vehicles, slowing the first-half decline to 14 percent.

Opel’s Shutdown

Opel moved in June to close a factory in Bochum at the end of 2016 in the first shutdown of a German car plant since World War II. GM’s group European car sales, including Opel, its U.K. sister brand Vauxhall and the Chevrolet marque, fell 8.7 percent in June to 109,764 vehicles. First-half sales deliveries declined 11 percent.

Unemployment in the 17 countries that share the euro was at a record high in May amid government budget cutbacks in response to the debt crisis. Europe’s carmakers, hamstrung by political pressure not to cut jobs, have closed just two plants in the region in the past four years: a GM facility in Belgium and Fiat’s Sicilian factory.

French President Francois Hollande said on July 14 that Peugeot’s plans are unacceptable and that the government may lean on the company to review the reorganization.

The plant shutdowns announced so far in Europe would only address a fraction of excess supply. Overcapacity in western Europe may more than double to about 2 million vehicles in 2012 as sales fall for a fifth straight year, according to IHS Automotive consulting company.

Audi Boost

European sales by Volkswagen, the region’s biggest carmaker, rose 4.3 percent to 300,858 vehicles in June, with the main VW brand posting a 4.8 percent gain and the luxury Audi division boosting registrations 8.6 percent. Six-month group sales fell 0.8 percent.

BMW, the world’s largest luxury-car maker, sold 82,519 cars in Europe last month, a 0.3 percent gain, with the namesake brand’s registrations unchanged and the lower-priced Mini unit’s sales rising 1.1 percent. Daimler AG, whose Mercedes-Benz ranks third in the luxury-vehicle industry after the BMW and Audi brands, reported a 4.4 percent decline in June European sales to 64,466 vehicles.

Volkswagen rose as much as 1.9 percent to 139.40 euros and was trading up 1.4 percent at 10:55 a.m. in Frankfurt. Peugeot fell 3 percent to 5.86 euros in Paris, while Renault gained 0.7 percent to 33.08 euros.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE