Europe August Auto Sales Drop as German Demand Weakens - Businessweek

European auto sales dropped in August as the region’s economic woes hurt demand in Germany, which previously helped offset declines in other countries.

Registrations fell 8.5 percent to 722,483 vehicles in August from 789,458 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Sales this year through August dropped 6.6 percent to 8.59 million cars.

“It’s a deteriorating picture, with also the German market now heading in the wrong direction,” said Jonathon Poskitt, head of European sales forecasting at LMC Automotive in Oxford, England. “Consumer confidence is being hit with all that’s going on in Europe. There’s no quick turnaround in sight.”

The European auto market has shrunk for 11 consecutive months, and ACEA is forecasting a 17-year low for full-year sales. Industrywide car deliveries in the region are set to drop 9 percent this year and 3 percent in 2013 before recovering in 2014, Goldman Sachs said Sept. 12.

Declines in Europe have prompted PSA Peugeot Citroen (UG) and General Motors Co. (GM)’s Opel unit to announce the first French and German car-plant shutdowns in decades.

Business confidence in Germany fell for a fourth straight month in August as the sovereign debt crisis curbed growth in Europe’s largest economy. German gross domestic product growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first as the debt crisis damped demand for exports and prompted companies to postpone investments.

German car registrations fell 4.7 percent in August.

Contraction Forecast

ACEA compiles sales figures from the 27 European Union countries plus Switzerland, Norway and Iceland. The group forecast on June 6 that industry sales in the region will shrink 7 percent this year to the least since 1995 and 21 percent below the 2007 peak. European car sales in July fell 7.5 percent to 972,860 vehicles, the ACEA also said today.

“We see no sign of recovery in the European market,” Volvo Cars Chief Executive Officer Stefan Jacoby said Sept. 5. Volvo is “evaluating” whether to start cutting prices in response to discounts from competitors, he said.

Peugeot, Europe’s second-largest carmaker, will be removed from France’s leading stock index after the Paris-based company’s shares declined more than 50 percent in the last 12 months.

Peugeot Loss

Peugeot stock has been trading near a 26-year low in recent months as Europe’s economy struggles. The automotive division has been burning through 200 million euros ($262 million) in cash a month for the last year, Chief Executive Officer Philippe Varin said in July as the company reported an 819 million-euro first-half net loss.

The French carmaker’s reorganization includes reducing its workforce by 6.7 percent and stopping production by 2014 at its factory in the Paris suburb of Aulnay. Peugeot’s European sales declined 12 percent in August to 81,562 cars.

Fiat SpA (F) Chief Executive Officer Sergio Marchionne said Sept. 14 that German carmakers remain opposed to his efforts to form a united front to push the European Union to address overcapacity in the region. Calls for coordinated efforts have “fallen on deaf ears, certainly from my German colleagues, who do not see the need,” Marchionne said.

Fiat will halt production at its Pomigliano plant, where it builds Panda subcompacts, for two weeks starting September 24 because of “weak demand,” a Fim labor union official said Aug. 29. The carmaker will present a new plan for its European business at the end of October. Fiat’s European sales fell 18 percent to 37,687 cars in August.

Audi Boost

Volkswagen AG (VOW), Europe’s largest carmaker, reduced its internal sales forecast for 2012 by as many as 100,000 vehicles as the sovereign debt crisis saps demand, a person familiar with the matter said this month. The lower delivery target is focused chiefly on Europe and affects models such as the Polo subcompact. European sales at VW rose 1.6 percent to 204,034 vehicles in August, with the main VW brand posting a 3.3 percent decline and the luxury Audi division boosting registrations 8 percent.

Italy’s registrations plunged 20 percent, while car sales in France declined 11 percent. Sales rose 3.4 percent in Spain and 0.1 percent in the U.K.

Opel Plant

Opel has proposed closing 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 18 percent in August to 53,586 vehicles.

Europe’s carmakers, under 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.

The plant closures 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 consulting company IHS Automotive.

Bayerische Motoren Werke AG (BMW), the world’s largest luxury-car maker, sold 42,894 cars in Europe last month, a 12 percent drop, with the namesake brand’s registrations falling 11 percent. Daimler AG (DAI), whose Mercedes-Benz ranks third in the luxury- vehicle industry after the BMW and Audi brands, reported a 0.3 percent decline in August European sales to 39,464 vehicles.

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net

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