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VW Sales Growth Slows in March on Europe Market Declines

Volkswagen Growth Slows in March as Europe Headwinds Intensify
VW forecast last month that earnings this year will match the level of last year, with first-quarter figures dropping from a year earlier due to weak demand in Europe and costs to introduce new vehicles. Photographer: Valentin Flauraud/Bloomberg

Volkswagen AG, Europe’s biggest automaker, said global sales growth slowed in March and that headwinds in its home region are intensifying.

VW eked out a 0.2 percent rise in deliveries last month to 864,400 vehicles as demand in China and North America more than offset shrinking sales across Europe, the Wolfsburg, Germany-based carmaker said today. In the first two months of the year, VW vehicle deliveries rose 8.3 percent to 1.4 million.

“The data for March clearly show that the markets are becoming even more difficult,” Christian Klingler, VW’s sales chief, said in the statement.

Auto executives are forecasting a sixth straight annual decline for the industry in Europe this year as the region’s waning economy stifles demand for new cars. VW, which forecasts 2013 earnings matching last year’s level, reiterated last month that first-quarter profit will likely drop due to weak demand in Europe and costs to introduce new vehicles.

“I expect sales growth rates to remain muted beyond the first quarter, because the European market is just very weak,” Hans-Peter Wodniok, an analyst at Fairesearch GmbH in Kronberg, Germany, said in a phone interview. Pricing and underlying profit will be in focus when VW releases first-quarter earnings later this month, he said.

The shares declined as much as 6.65 euros, or 4.4 percent, to 146.20 euros and were down 4 percent as of 3:42 p.m. in Frankfurt trading. The stock has declined 15 percent this year, valuing the company at 66.4 billion euros ($86.8 billion).

Deliveries Down

VW’s first-quarter deliveries in Europe dropped 5.9 percent as sales in Germany, the region’s largest market, plummeted 7.2 percent. Deliveries in North America were up 15 percent and rose 21 percent in China, Volkswagen’s biggest single market. Volkswagen’s presence in emerging markets like China, Brazil and Russia has enabled it to steer through the European industry gloom better than many mass-market rivals.

PSA Peugeot Citroen’s credit rating was cut to four levels below investment grade yesterday by Moody’s Investors Service, which said Europe’s car-market contraction puts the auto manufacturer’s plans to restore cash flow at risk.

Peugeot, Europe’s second-largest carmaker, is eliminating jobs and closing a factory to end losses as the region’s auto market, already close to a two-decade low in 2012, shows no signs of a rebound.

Europe’s car-sales contraction accelerated in recent weeks as a steepening decline in Germany, the region’s biggest market, added to the drop. Registrations fell 10 percent to 829,359 vehicles in February, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said last month. Two-month sales fell 9.3 percent to 1.75 million cars. Figures for March will be released next week.

Fiat SpA plans to review forecasts for 2013 at the end of this month. A decline in European sales “would be worse than the forecasts we indicated in January as our base for 2013 targets,” Chief Executive Officer Sergio Marchionne said on April 9.

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