VW suffers rare drop in brand sales in ailing Europe

BERLIN Tue Aug 13, 2013 11:08am EDT

A Volkswagen sign is seen at a Volkswagen dealership in Carlsbad, California, April 29, 2013. REUTERS/Mike Blake

A Volkswagen sign is seen at a Volkswagen dealership in Carlsbad, California, April 29, 2013.

Credit: Reuters/Mike Blake

BERLIN (Reuters) - Europe's biggest automaker Volkswagen (VOWG_p.DE) reported a rare dip in sales of its core passenger car brand and said business conditions remained tough, in an industry hampered by slumping demand and overcapacity.

The VW namesake brand, accounting for about half of the German powerhouse's global deliveries, sold 466,100 vehicles in July, down 0.5 percent from July 2012, Wolfsburg-based Volkswagen said on Tuesday.

It was only the second month of falling sales in three and a half years.

Since a fall in December 2009, VW brand sales rose for 38 straight months until March 2013, when they eased 0.8 percent. Deliveries were up again in April, May and June.

"The July drop may just be a slip-up," said Hanover-based NordLB analyst Frank Schwope. "Brand sales should bounce back in coming months."

Sales of VW's biggest volume brand declined in all major markets except the Asia-Pacific region where China, VW's biggest market, posted a 19 percent gain in the January-July period.

Year-to-date deliveries of models including VW's best-selling Golf hatchback plunged 9.1 percent in Germany to 328,400 cars while pan-European sales were down 6.8 percent to 980,000, according to VW.

The VW brand contributed more than a quarter of the group's 3.43 billion euro ($4.56 billion) operating profit in the second quarter ended June.

The "market situation remains challenging," VW sales chief Christian Klingler said.

The multi-brand group withstood most of last year's slump in major European markets thanks to growth overseas and a wide range of models from small fuel-efficient vehicles like the Up! city car to ultra-luxury saloons including Bentley's Continental.

By contrast, automakers dependent on European markets such as PSA Peugeot Citroen (PEUP.PA) have been suffering for months from the region's economic crisis, seeking to close factories and lay off staff to counter heavy losses.

Half-year group deliveries, including luxury nameplates Audi and sports-car maker Porsche, were up 5.5 percent to a record 4.7 million, powered by gains in North America and China. Seven-month data will be published on Friday.

The VW marque's year-to-date sales were up 3.7 percent to 3.38 million autos.

Europe's No. 1 carmaker by sales last month stood by its goals to match last year's record operating profit and to push sales and deliveries to new highs after posting a surprise gain in second-quarter earnings.

(Reporting by Andreas Cremer; Editing by Erica Billingham)

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