FRANKFURT/PARIS Sales of new cars grew in France and Spain last month, raising hopes that the worst may be over for a western European auto market enduring its weakest year in two decades.
Demand in Italy, one of the worst performing major car markets on the continent, continued to slide albeit at a slower pace, driven by poor figures for the Volkswagen (VOWG_p.DE) and Opel brands (GM.N), according to government data.
September sales are a good gauge of underlying trends in Europe, given that August's results are not seen as indicative of overall demand since many car buyers are on holiday. It is also a crucial month for the UK market.
Paris-based industry group CCFA on Tuesday maintained a full-year forecast of an 8 percent decline for France, Europe's third-largest auto market, implying a slight improvement in the final quarter after an 8.5 percent drop in the first nine months.
Registrations of new cars grew 3.4 percent to over 142,000 vehicles in September, it said in a statement, as a 19 percent sales surge for the Renault (RENA.PA) marquee more than offset 6-7 percent declines at French rival PSA's (PEUP.PA) Peugeot and Citroen brands.
Sales of Mercedes-Benz brand luxury cars jumped almost 40 percent on pent-up demand after the country's highest administrative court ordered the government to lift its sales ban on the German carmaker. France had barred sales of roughly half of Mercedes cars over parent Daimler's (DAIGn.DE) refusal to stop using a banned air-conditioning coolant.
Separately, Spain's auto industry group Anfac said new car sales in the austerity-hit country jumped 29 percent to over 45,000 cars last month, helped by government subsidies and one extra working day this year.
"The market last month should not be taken as a reason to celebrate, but could be seen as a sign that we're starting to get some breathing room," said Juan Antonio Sanchez Torres, President of vehicle showroom and sales association Ganvam, in an Anfac statement.
Jonathon Poskitt of market researcher LMC Automotive said the results were somewhat mixed: "France is quite positive and demand is moving in the right direction, but I wouldn't get too excited about Spain because they were helped by last September's particularly poor sales following a value-added tax hike."
Spain's center-right government has raised its main VAT rate by 3 percentage points to 21 percent as it tries to slash the public deficit and avoid a full international bailout.
Italian dealers said a 1 percentage point hike in VAT to 22 percent as of Tuesday helped to artificially inflate demand last month, when sales fell only 2.9 percent, as consumers looked to save 200 euros on average off the purchase of a new car.
Italy's auto industry association head Roberto Vavassori estimated the market would drop by 7-9 percent this year.
Oliver Baete, a board member at insurer Allianz (ALVG.DE), said his company's car insurance business showed "consumers are on strike in Italy and that is far from over".
Industry watchers have been waiting to see whether last month would reveal if the 5 percent decline in August was just a blip or could signal further problems to come, after the overall European market crashed to the lowest level for the first eight months of a year since records began in 1990.
The UK's automotive industry body SMMT is due to publish monthly sales figures on Friday, having forecast a gain of over 7 percent to 386,000 vehicles newly registered last month.
Germany, normally Europe's biggest car market, could also have seen continued weakness and demand could soften now that German media are reporting that Chancellor Angela Merkel might renege on an election promise not to hike taxes.
"We would be happy already if the drop simply narrows from quarter to quarter. Volumes are at best likely to stagnate in September," said an auto industry source in Germany.
The industry consensus is for a lethargic and uneven return to growth next year, as the flow of cheap credit to the private sector remains strained in many parts of southern Europe.
Most new car buyers in Europe finance their purchase via loans or leases, so demand is impacted by the availability of and conditions attached to credit.
(Additional reporting by Paul Day in Madrid and Isla Binnie in Milan; writing by Christiaan Hetzner; editing by Natalie Huet and Tom Pfeiffer)