UPDATE 1-German car market shows signs of life in July

Fri Aug 2, 2013 9:03am EDT

* Mercedes, BMW and Opel all see double-digit gains

* Germany "not out of the woods yet" -industry official

* Weak H1 doesn't reflect solid German fundamentals

By Christiaan Hetzner

FRANKFURT, Aug 2 (Reuters) - A rise in premium car sales and an extra working day helped Germany's auto market, the largest in Europe, to grow slightly in July in another sign the worst may be behind the industry.

Registrations of new cars in Germany rose 2.1 percent to 253,146 vehicles last month, according to official figures published on Friday by the Federal Motor Transport Authority (KBA).

The increase adds to evidence that the European car market, where sales have dropped to a two-decade low, might have bottomed out.

"The German car market is not out of the woods yet, but July is a good start for the stabilisation we expect in the second half," said Matthias Wissmann, president of Germany's automotive industry association VDA, who said that domestic orders had risen 3 percent.

In the first half, the German car market shrank 8.1 percent, according to KBA figures.

Sales in other major European markets have also shown signs of stabilising at low levels. In France, volumes rose by 1 percent last month, while only falling 2 percent in Italy, the smallest year-on-year drop since April 2011.

In Germany, Mercedes-Benz and BMW brand registrations jumped by almost 13 percent in the month. Not all premium carmakers performed well, though, with Audi experiencing a 10 percent drop for the period.

Opel had an 11 percent bounce in July, beating a small gain by rival Ford and Volkswagen's 5 percent drop.

STRONG FUNDAMENTALS

Registrations can be an imperfect indicator for the health of Germany's car market, since they can lag demand by around two to three months. Also, automakers can boost their monthly results by registering new cars to themselves.

But Germany's economic fundamentals, which include low unemployment, rising wages and consumer confidence at its highest level in nearly six years, should provide a positive backdrop for the sector.

And there are some signs of underlying improvement.

According to Frankfurt-based market researcher Dataforce, car sales to private households have improved on an adjusted level for four straight months in the first half.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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