Car sales upturn fails to halt European price war

PARIS, April 17 Thu Apr 17, 2014 2:09am EDT

PARIS, April 17 (Reuters) - Europe's car sales recovery may be taking hold, according to registrations data published on Thursday, but confidential industry surveys show the price war is raging on.

Discounts outgrew first-quarter sales, according to the data seen by Reuters, casting doubt on the strength of the recovery and earnings outlook for carmakers in the region.

Registrations rose 10.4 percent in March, the Association of European Carmakers said, rounding off an 8.1 percent gain for the first three months, after six straight years of contraction.

But average retail incentives jumped 12 percent to almost 2,750 euros ($3,800) per vehicle in the five biggest markets, the findings of a major market researcher show.

"There should be significant concern about artificial growth," said Ernst & Young senior automotive partner Peter Fuss, citing discounts, government incentives and cut-price sales of unused vehicles as 'nearly new'.

The industry's bottom line "continues to be under severe pressure", he said. ($1 = 0.7243 Euros) (Additional reporting by Edward Taylor in Frankfurt and Gilles Guillaume in Paris; Editing by James Regan)