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Car sales up but so are discounts

Thursday, April 17, 2014 - 01:55

Apr.17 - Registration data suggests Europe's car sales recovery may be taking hold but as Julian Satterthwaite reports a confidential industry survey shows the pickup is failing to halt a price war.

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Six years of falling car sales in Europe are finally over. Latest figures show shipments were up 10% on the month and 8% on the quarter. Among the winners are some car makers more used to bad news. Sales at Peugeot - which recently agreed a Chinese tie-up to stay afloat - were up two percent. And Renault's surged by almost a fifth thanks to strong sales of no-frills vehicles. Pietro Boggia is from Frost & Sullivan. (SOUNDBITE) (English): PIETRO BOGGIA, FROST AND SULLIVAN, AUTO ANALYST, SAYING: "There is a need for replacements. Average of the models is now seven to eight years, so buyers who waited to replace their vehicles now feel that there is more confidence and it's the right moment to do so." But there's a problem - discounting is also up, and that could mean profitability remains elusive. Market researchers say average sales incentives jumped by 12 percent to almost 3,000 euros per vehicle. Discounts at Peugeot and sister brand Citroen were even higher. In Germany there's another way to fiddle the figures. Consulting firm Dataforce says almost a third of sales there are demonstration vehicles. That means cars registered by manufacturers to their own dealers, and then sold as nearly new - often at a loss. Tim Urquhart is from IHS Global Insight. (SOUNDBITE) (English): TIM URQUHART, AUTO ANALYST, IHS GLOBAL INSIGHT, SAYING: "The pricing environment has been very, very harsh for some time now, and it's definite that this is a big element in the rebound, especially with the a lot of the mid-market manufacturers as well. It's a really viciously competitive environment for those kinds of companies." The discounts and sales tricks are expected to decline as recovery takes hold. But it's likely to be sometime before sales return to pre-crisis levels. That means car pricing - and the profitability of the manufacturers - may never be the same again.

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Car sales up but so are discounts

Thursday, April 17, 2014 - 01:55