European Car Sales Hit 20-Year Low

Passenger car sale demand for May dropped by 5.9 percent on the same month last year in the 27-country European Union to 1.042 million units, the lowest level since May 1993 when sales dropped below 1 million, according to new figures released by ACEA.

Colleen Barry, AP Business Writer

Jun 18, 2013

MILAN (AP) -- European car sales hit their lowest level for the month of May in 20 years as the region's recession dragged on, the European automakers' association said Tuesday.

The results come after April offered a brief respite, with a slight increase in sales due to an extra two work days compared with a year earlier, not a change in consumer heart.

IHS Automotive analyst Carlos da Silva nonetheless sees the situation in Europe stabilizing.

"After five months, the situation remains tense," da Silva said. "Yet, for the second month in a row the rate of decline is slowing down. This means that sales are stabilizing trend-wise."

The economy of the 17 European Union countries that use the euro shrank by 0.2 percent in the first quarter of this year — the sixth such decline in a row — and unemployment is at 12.2 percent. Meanwhile, the wider 27-country EU has also seen its economy slide into recession, shrinking 0.1 percent in the first three months of 2013.

Europe's recession has hit carmakers especially hard, as consumers put off purchases of high-ticket price items like cars under rising unemployment. Automakers have announced factory closures and put off new car launches in a bid for survival and to return their struggling European operations to profitability.

Even in Germany, Europe's strongest economy, car sales dropped to a worrying 9.9 percent in May. In Europe's other leading car markets, the picture was just as bad: Italy was down 8 percent, France saw a 10.4 percent drop, and Spain was off by 2.6 percent. Britain was the only major car market to post growth, up 11 percent.

The head of Italy's association of foreign carmakers, Romano Valente, urged the government to resist raising the value-added tax on car sales. The tax is scheduled to increase to 22 percent from 21 percent in July. Officials have said it will raise 4 billion euros ($5.33 billion), but conservative lawmakers in the cross-party coalition are opposed, claiming it will hit sales of big-ticket items harder.

Mass-market carmakers — PSA Peugeot-Citroen, Renault, Ford, General Motors and Fiat — all suffered double-digit declines in May. Germany's Volkswagen saw its sales drop at a slightly lower rate — a 2.8 percent drop in brand sales and 5.9 percent decline for the group. Sales of Mercedes brand were up 2.8 percent, while BMW brand sales declined 8.1 percent.

Jaguar/Land Rover and Japan's Mazda resisted the crisis with a 9.8 percent and 30 percent increase in sales, respectively, but on much smaller volumes and a market share of just 1 percent. Korean automaker Hyundai saw sales rise 1.9 percent.