Europe Car Sales Extend Downward Spiral With Worst Drop of 2019

Economy Europe

European car registrations fell sharply in June, resuming a downward spiral that adds to the industry’s litany of woes.

After a profit warning last week from German manufacturer Daimler AG, Europe’s industry body reported a 7.9% year-on-year drop in sales for June. That’s the biggest decline this year, and the ninth in the last 10 months.

European car sales resumed their drop in June after a static May

The weakening automotive market may partly reflect growing nervousness among European households about committing to a big-ticket purchase. If consumers continue to rein in spending, that’s another problem for the region’s economy, where manufacturing is already under pressure from cooling global demand.

Raging trade wars have already put factory confidence under pressure and top exporter Germany is at risk of a recession. The rising potential for a hard Brexit dragged the U.K.’s pound to its lowest level this week since 2017.

A combination of factors likely fed the monthly decline in Europe, said Marco Valli, chief euro-zone economist at Unicredit in Milan. He noted strong industry growth in recent years and issues around diesel vehicles.

“The car cycle is getting mature” and consumer sentiment is “off its cyclical peak,” he added. “All this is overlapping and contributing to the weak outlook for car sales.”

New-car registrations dropped more than 8% in France and Spain, while German and U.K. sales fell 4.7% and 4.9% respectively, the ACEA said Wednesday.

Daimler last week issued its fourth profit warning in just over a year due to the costs of a recall and allegations of emissions-tampering in diesel cars. The carmaker also blamed weaker global markets. BMW in May reported its first loss in a decade in the main automotive division.

At the year’s half-way mark, Europe is likely facing a second annual decline in car sales. The industry association has already revised its prediction for the year to a 1% drop, blaming uncertainty surrounding Brexit and flattening demand. It had previously forecast a 1% rise. Before last year, the industry had enjoyed uninterrupted annual growth since 2013.

‘Difficult’ Period

“We’re standing in front of a difficult second half of the year,” said Peter Fuss, a partner at EY consultancy. “Little positive impetus for the new car market in the EU can be expected in the coming months.”

A truce in the U.S.-China trade spat remains delicate. U.S. President Donald Trump said late Tuesday he could impose additional tariffs on Chinese imports if he wanted to, after promising last month to hold off on more duties. Tensions between the two nations have hurt China’s economy, prompting car sales to slump, and have hurt the export of BMW and Mercedes-Benz cars made in the U.S.

The French automaker was more optimistic on Tuesday, saying it expects European vehicle sales to remain stable this year, barring a hard Brexit. While Renault expects some recovery in volumes during the rest of 2019 thanks to new models, it sees the global car market shrinking by around 3%.

Nissan Woes

Renault’s partner Nissan Motor Co. was the worst-hit during the first six months of this year, registering a 24% drop in European sales as its best-selling SUVs Juke and Qashqai face competition from fresher rivals such as PSA Group’s Peugeot 3008 and Renault’s Captur. A company spokesman attributed the volume decline to a move away from less-profitable sales channels such as rentals and a transition from current models to newer and cleaner engines.

After Nissan, Honda and Fiat-Chrysler registered the worst sales in Europe since the start of the year with 15.4% and 9.5% declines respectively.

In May, European car sales rose less than 1%, an unexpected and slight reprieve in a nine-month run of lower sales. The market benefited from trade-in incentives for older diesel cars and two additional shopping days that month.



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