Bloomberg News

Europe Auto Market Headed for Biggest Plunge in 19 Years

October 16, 2012

Renault Leads Biggest Europe Car Sales Drop in Almost Two Years

Automobiles sit on display on the Renault SA stand at the Paris Motor Show in Paris, France, on Friday, Sept. 28, 2012. Renault’s European sales fell 29 percent last month to 78,299 cars. Photographer: Jason Alden/Bloomberg

European car deliveries headed for their biggest annual plunge in 19 years after the region’s deliveries tumbled 11 percent in September.

Registrations last month dropped to 1.13 million vehicles from 1.27 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. Nine-month sales fell 7.2 percent.

The market is now on track to decrease as much as 10 percent in 2012, the worst sales slump since the aftermath in 1993 of the region’s currency crisis, the ACEA said. Renault SA (RNO) posted a European sales drop in September of 29 percent, while Fiat SpA (F) decreased 19 percent. Tiremaker Nokian Renkaat Oyj (NRE1V) forecast second-half operating profit will fall on weak demand.

“We have seen the European market deteriorate, from an already weak level, rather than recover,” said Marc-Rene Tonn, a Hamburg-based Warburg Research analyst. “That is something that is weighing on the shares.”

Renault fell 1 percent to 35.48 euros at the close in Paris. PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker, declined 3.4 percent, while Fiat dropped 0.1 percent in Milan.

The region’s declining auto market has begun to hit tiremakers as well. Nokian Renkaat today reported preliminary third-quarter revenue and operating profit that missed analysts’ expectations. European replacement tire sales, which account for about 75 percent of the industry’s revenue, will fall around 5.9 percent this year, Goldman Sachs Group Inc. said Sept. 12.

Tiremakers Drop

Nokian Renkaat plummeted 12 percent, the biggest drop since Dec. 12, 2008, to 29.98 euros at the close in Helsinki. Michelin & Cie, Europe’s biggest tiremaker, fell 3.6 percent, while Continental AG (CON), the region’s No. 2 tiremaker, dropped 2.1 percent.

Four of Europe’s five biggest automotive markets shrank last month, with German deliveries, which account for 25 percent of the region’s total sales, dropping 11 percent.

A jump in so-called self-registrations by dealers, accounting for 33.5 percent of the market in September versus 28.7 percent a year earlier, prevented the German drop from being even steeper, according to Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.

“The higher the self-registration numbers, the more difficult the market gets and the higher incentive spending becomes,” Dudenhoeffer said today in a report. “The car market in Germany is getting tougher and shifting into a recession.”

Steeper Decline

The ACEA compiles auto-sales figures from the 27 European Union countries plus Switzerland, Norway and Iceland. The trade group on Oct. 12 predicted a 2012 market contraction of 8 percent to 10 percent, steeper than a 7 percent drop it projected earlier.

General Motors Co. (GM:US)’s group sales in Europe last month dropped 16 percent to 95,398 vehicles, led by a 20 percent drop for the Chevrolet marque. GM’s main Opel and Vauxhall brands in the region posted a 16 percent decline. The Detroit-based carmaker has racked up $16.8 billion in losses in Europe since 1999. The business posted a first-half loss before interest and taxes of $617 million, and wrote down $590 million of goodwill.

Opel has proposed closing a factory in Bochum, Germany, at the end of 2016 in the first shutdown of a car plant in the country since World War II.

European sales by Dearborn, Michigan-based Ford Motor Co. (F:US) declined 15 percent to 92,603 cars. The U.S. company’s European pretax operating losses widened to $404 million in the second quarter from $149 million in the first quarter. The business earned profit of $176 million a year earlier.

Ford Losses

Ford forecast on July 25 that its full-year European losses will exceed $1 billion, double an earlier forecast. Roelant de Waard, vice president of marketing, sales and service at the Ford of Europe division, said on Sept. 27 that the carmaker has been among manufacturers in the region boosting sales figures through self-registrations, in which dealers sell cars to themselves without having customer orders.

Peugeot posted an 8.6 percent slide in sales in the region last month to 121,898 cars. The Paris-based manufacturer has been burning through 200 million euros in cash a month as the auto market contracts, a figure that may fall by 50 percent in 2013, Chief Executive Officer Philippe Varin said Sept. 27.

Registrations in Europe by market leader Volkswagen AG (VOW) fell 8.4 percent last month to 269,953 vehicles as the main VW brand posted a 14 percent drop. Sales at the Audi luxury marque rose 1.3 percent. Wolfsburg, Germany-based Volkswagen is cutting back parts purchases by as much as 10 percent and demanding cheaper components in response to the weak market in the region, suppliers said last week.

Daimler AG (DAI), whose Mercedes-Benz ranks third in the luxury- vehicle industry after the BMW and Audi brands, reported a 6.6 percent slide in September European sales to 60,803 vehicles, with declines of 6.1 percent at Mercedes and 11 percent at the Smart two-seat car division..

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


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