European Car Sales Plummet in July and August

VW remains number one in Europe as PSA and Renault pick up share.

The European car market continued stuck in reverse this summer, according to the latest sales data released this morning by ACEA, the automakers trade association. This continues a worrisome downward trend from the 2nd quarter of 2010 when vast taxpayer-subsidized replacement programs initiated the previous year began expiring.

As in the U.S., European taxpayers appear to be revolting against an endless expansion of government spending, making further subsidies of local industries increasingly difficult.

While the results are important in themselves because they involve the world’s players and their ability to fund future products to ensure survival, it is also indicative of where the U.S. market might be heading with, say, five or more makers competing closely for the top volume rankings.

In  Europe all others fight for table scraps as smaller makers who need to play in global markets use marginal operations there to survive. It could happen here.  Once upon a time a maker could thrive in the U.S. alone – it’s now a business planning fairy tale in my view.

In Europe, new registrations fell by 18.6% in July and 12.9% in August. Eight months into the year, new cars in the EU totaled only 9,021,703 units or 3.5% less than over the same depressed period a year ago, which itself was artificially propped up by government spending on incentive programs.

In July, a double-digit collapse occurred in the main volume markets, ranging from -12.8% in France to -13.2% in the UK, -24.1% in Spain, -25.7% in Italy and a whopping -30.2% in Germany, traditionally Europe’s economic powerhouse and export giant. Overall, 1,032,893 new cars were registered in the EU, or 18.6% less than in July last year.

In August, as in July, France (-7.9%), the UK (-17.5%), Italy (-19.3%), Spain (-23.8%) and Germany (-27.0%) all recorded a considerable downturn. Traditionally a month with lower registration levels, August nonetheless recorded a total of 701,710 new car registrations, a decline of -12.9%.

From January to August, new car registrations across the EU reached 9,021,703 in number, or 3.5% less than in the first eight months of 2009. Of the most significant markets, France (+2.0%), the UK (+13.2%) and Spain (+21.9%) expanded, while Italy (-2.5%) and once mighty Germany (-28.7%) contracted.

The steepest fall was noted in Bulgaria (-39.1%) and the highest increase was in Ireland (+49.6%), but beware of percentages without absolute numbers – a favorite ruse of hack journalists who are feed such tripe by P.R. departments. These are small markets if you look at the data – Bulgaria at 15,000 units year-to-date; Ireland at 50,000 units.

There were some clear winners and losers in the volume markets if you look at other year-to-date trends since one or two months are too short a period to look at, as any economist – one handed or otherwise will tell you.

The French, led by the Renault Group, picked up market share. With some deft model packaging, which eliminated options and added them as standard equipment that apparently targeted a sleeping Ford – which relied on an old pricing model of base price, plus option A, plus option B,  plus, plus – Renault Group increased sales more than 13%, thereby increasing share to 9.9%. This means that VW group remains number one in Europe with a commanding 21.3% share (-0.2 compared with previous year period) followed by PSA Group in second at 13.7% share, which picked up 0.7% in share based on its 1.9% sales increase, then Renault with 10.4% share in  third.

GM Group in fourth place was down from a 9% share to 8.4% And Ford got hurt with a 9% sales decline which resulted in a 8.3% share (-0.5) for fifth place.

Fiat Group, which is now running Chrysler of course, also took it on the chin – down 14% in sales, and dropping on full point of share to 7.9% for sixth place.

Two predictions:  if the Ford Fiesta follows the European premium pricing “base plus plus” model in the U.S., it will be dead on arrival; Fiat, which is about to introduce the tiny 500 in the U.S. got clobbered because of its inability to sell small Fiats in its home market and the rest  Europe with its mega-fuel prices – not auspicious for the 500’s future in North America.

Another interesting Fiat comment comes from investment banker Morgan Stanley. It now values Fiat’s auto business, which sells more than 2,000,000 vehicles annually, at Euro 3 billion. MS values Ferrari at Euro 3.1 billion. Ferrari sells 6,000 sports cars each year.

Chart follows.

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