Bloomberg News

Europe Car Sales Surge Most in Four Years on Lower Prices

January 16, 2014

European new-car sales surged the most in almost four years as price cuts by producers such as Renault SA (RNO) and Ford Motor Co. (F:US) helped generate a recovery that industry executives say will last in 2014.

Deliveries last month jumped 13 percent to 948,090 vehicles from 839,027 a year earlier, the Brussels-based European Automobile Manufacturers Association, or ACEA, said today. That pared the decline for the year to 1.8 percent for a total of 12.3 million autos, the lowest number since 1995.

Carmakers are predicting a gradual increase in European demand this year after a sovereign-debt crisis and recessions led to a six-year contraction in deliveries through 2013. Consumers replacing old cars may account for some of the recovery, though gains are also being fed by continued incentives from automakers and a government program in Spain to encourage trade-ins of old vehicles for scrapping.

“There’s a good case to say that the car market is improving on an underlying basis,” Sascha Gommel, an analyst at Commerzbank AG in Frankfurt, said by phone. “The fleet aged a lot in Europe over the last years because demand was so low, and you still have very low interest rates.”

Confidence Climbs

The sales increase in December was the steepest since a 13 percent jump in January 2010. It marked the fourth successive month of growth, the longest stretch since the June 2009 through March 2010 period.

Among countries using the euro, economic confidence rose in December to a 2 1/2-year high after an 18-month recession ended in the second quarter. Inflation in the U.K., which isn’t part of the euro zone, slowed in December to 2 percent from 2.1 percent in November, which may allow the Bank of England to maintain interest rates at a record low.

Registrations rose in Europe’s five biggest auto markets, with jumps of 24 percent in the U.K. and 18 percent in Spain, where the government revived a cash-for-clunkers incentive program in October. Growth in another 11 countries exceeded 10 percent, including a doubling of demand in the Netherlands that was propelled by buyers seeking to avoid a government surcharge taking effect in January.

German Discounting

French carmakers PSA Peugeot Citroen (UG) and Renault together ranked among the three biggest vehicle discounters in Germany all year, according to industry publication Autohaus PulsSchlag. Ford, which posted a 20 percent European sales surge in December, widened its German price reductions to 12.2 percent that month from 11.5 percent in November. Fiat SpA (F)’s namesake brand, which sold 2.3 percent more cars in the region, pushed its average discount to 14 percent from 13.5 percent.

The ACEA compiles figures for European Union countries plus Switzerland, Norway and Iceland. The group will start including numbers this year from Croatia, which became the 28th EU member in July.

Russian sales rose 4 percent in December to 264,257 cars and light commercial vehicles, boosted by unusually mild weather and customers seeking to take advantage of a car-loan subsidy expiring at the end of 2013, the Moscow-based Association of European Businesses said yesterday in a statement. Deliveries in 2013 fell 5.5 percent to 2.78 million, the first drop following growth averaging 27 percent in the previous three years. Sales this year may decline to about 2.73 million vehicles, the group said.

Aging Vehicles

Vehicles on European roads have been in use for an average seven to eight years, unusually long for that market, prompting buyers to seek new models, Stephen Odell, head of Ford’s business in the region, said in an interview on Jan. 13. At the same time, euro-area unemployment near record highs will hold back growth prospects, he said.

Odell predicted that Ford’s 19 main European car markets will expand as much as 6 percent this year. That compares with a industrywide increase for Europe of 4.2 percent estimated today by Erich Hauser, a London-based automotive analyst at International Strategy & Investment Group, and a minimum 3 percent foreseen by Gommel at Commerzbank.

Demand may be helped as an “unusually high number” of car leases expire this year, leaving consumers and corporate customers to decide whether to keep the model or buy a new one, Hauser said by phone. Another signal of potential growth is a recent increase in used-vehicle prices, as “the saving to be had from a used car gets smaller versus a new car.”

Audi’s Gain

For the second year in a row, the Fiat nameplate was outsold in Europe by Bayerische Motoren Werke AG (BMW)’s namesake brand, Volkswagen AG (VOW)’s Audi division and Daimler AG (DAI)’s Mercedes-Benz, the world’s biggest premium-vehicle manufacturers. Of the three, only Audi posted a sales gain in the region in December, with a 17 percent jump, while Mercedes was the only one reporting full-year growth.

Tata Motors Ltd. (TTMT)’s Jaguar Land Rover luxury division sold 6 percent more cars and sport-utility vehicles in Europe last month, contributing to a 9.5 percent full-year gain for the unit. Volvo Cars, the Swedish maker of premium vehicles owned by China’s Zhejiang Geely Holding Group Co. (175), posted a 32 percent jump in European sales in December.

December sales by Munich-based BMW dropped 5.7 percent in Europe, pushing the full-year figure to a 0.6 percent decline.

“Europe still remains quite tough,” Ian Robertson, BMW’s sales chief, said at a North American International Auto Show press conference in Detroit on Jan. 13. “It’s going to take several more years” for the market to reach previous levels. “You still have unemployment,” and “an economy that is extremely fragile.”

Dacia Boost

Group registrations in Europe increased 22 percent at Wolfsburg, Germany-based Volkswagen, the region’s biggest carmaker, and 29 percent at third-ranked Renault, which was bolstered by a 48 percent surge at the entry-level Dacia brand. Second-place Peugeot sold 8.6 percent more cars.

General Motors Co. (GM:US) posted a 13 percent increase as a 22 percent jump at the Opel and Vauxhall divisions based in Europe more than made up for a 29 percent plunge at the Chevrolet brand, which is being withdrawn from the region by the end of 2015. Toyota Motor Corp. (7203)’s sales in Europe, where the Japanese carmaker places 10th in sales, rose 11 percent, while demand at Tokyo-based Mitsubishi Motors Corp. (7211), the 18th-biggest seller in the market, more than doubled.

Hyundai Motor Co. (005380)’s European sales fell 8.4 percent last month, the steepest drop in the region by an Asian carmaker. Seoul-based Hyundai’s sister brand Kia sold 3.5 percent fewer cars in December, while Tokyo-based Honda Motor Co. (7267) posted a 0.9 percent decline.

“Many European markets are over the worst of the economic crisis, but recovery will be slow, particularly in the first quarter,” Allan Rushforth, chief operating officer of Hyundai in Europe, said in an e-mail. Hyundai “will continue to develop our sales organically rather than pursuing market-share gains at any cost.”

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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