REFILE-UPDATE 1-European car sales up for sixth month as economies recover

Tue Mar 18, 2014 6:54am EDT

* Spain, Portugal, Ireland sales growth in double digits

* Toyota, GM, Ford, Renault lead February's increase

* French auto sales dip 1.4 pct; Germany's underperform

By Agnieszka Flak

MILAN, March 18 (Reuters) - European car sales rose 7.6 percent in February, as a gradual economic recovery in Portugal, Spain and Italy boosted demand for mass-market brands, industry data showed on Tuesday.

New passenger-car registrations in the European Union and European Free Trade Association trading bloc rose for the sixth straight month to 894,730 vehicles in February from 831,371 in February a year ago, according to data from the Association of European Carmakers (ACEA).

Europe's car industry endured a six-year slump, with auto sales falling to a two-decade low, as austerity-hit consumers cut back on expensive purchases. Now the market is starting to grow again.

"As the year progresses, we would expect the car market continuing to pick up because the economy is starting to move in the right direction," said Jonathon Poskitt, head of European forecasting for LMC Automotive. Selling rates in western Europe clawed their way back to mid-2012 levels, he said.

"People are going to feel more confident to make that big-ticket purchase, such as a car, that they've been holding off on because of the concerns over their employment prospects and their income," he said.

At the Geneva auto show earlier this month, executives said they were encouraged by the recovery in crisis-hit European countries, although they were worried that volatile emerging markets could overshadow the gains.

Registrations in Germany, the top car market, underperformed the regional trend, with a 4.3 percent increase, and fell by 1.4 percent in Europe's second-biggest car market, France. But sales grew by double digits in some states most hit by the crisis.

Sales grew 17.8 percent in Spain, 40.2 percent in Portugal and 20.6 percent in Ireland, signalling that a fragile recovery in the region was gaining strength. In Italy, the region's fourth-biggest market, sales grew 8.6 percent as the country recovers from its longest recession in 70 years.

"We keep forecasting an ongoing improvement of the underlying sales trend," ISI Group said in a note. "In addition, we keep highlighting improved vehicle pricing in tandem with better residual values and sales channel mix."

Sales at Renault Group jumped 11.5 percent, boosted mainly by a 33.6 percent surge in registrations of its no-frills Dacia brand. Ford sales were up 11.3 percent. Toyota Group, the world's biggest-selling car maker, posted a 14 percent increase, and General Motors saw sales go up 12.3 percent, boosted by a 15.6 percent increase in registrations of its Opel- and Vauxhall-branded vehicles.

Germany's Volkswagen group, Europe's biggest carmaker by volume, posted a 7.2 percent rise, helped by a 21.5 increase at its value brand Skoda, a 15.7 percent jump in Seat sales and an 11.8 percent gain at its premium brand, Audi. VW's performance was weighed down by a 0.8 percent decline in sales at its namesake brand.

French carmaker PSA lost some market share in February. Its overall sales grew 3.5 percent, supported by an increase in registrations of its Peugeot brand, but sales of Citroen-branded cars were roughly flat year-on-year.

The long-awaited revival of the European market seems to be on track, with almost all countries and manufacturers performing better. But industry players urge caution, pointing out the gain comes from historic lows. In Italy, for example, car sales are recovering from levels last seen in the 1970s.

"Sales have effectively been growing, but discounting practices have been following a very similar path, it seems," Carlos Da Silva, an analyst with market researchers IHS Automotive, said in a note. "This would tend to indicate that the overall situation remains more tense than it might appear."

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