November 2, 2012 / 1:11 PM / in 5 years

Europe's new car market slumps toward 1993 lows

FRANKFURT/PARIS (Reuters) - The western European auto market maintained its sharp descent towards levels last seen nearly 20 years ago as consumers worried about unemployment and euro zone austerity shunned car dealerships in October.

Industry data published on Friday showed that France incurred its 12th straight monthly decline in new car registrations, while demand in Spain continued to plummet.

Germany may have bucked the trend with an increase of half a percent, but once two extra working days in October are stripped out of the equation, its meager growth transforms into a material decline.

Smoothing out calendar effects by looking at Germany’s market over the past two months shows a market declining about 5.4 percent in the period.

“Currently there is no early indicator or other hard data pointing to an improvement in the next few months,” said Ulrich Winzen, chief forecaster in Germany for auto industry consultant R.L. Polk.

He currently expects western European car sales will fall clearly below the 12 million mark both this year and next, a level generally not seen since 1986 -- with the exception of 1993 when there was a short, sharp drop to 11.3 million cars.

While Germany is holding up relatively well given its largely resilient labor market and higher consumer confidence, car markets in structurally weak southern European economies continue to suffer heavily as more and more budget cuts, tax hikes and supply-side reforms are implemented.

September’s near 22 percent slump in Spain came after the government raised value-added tax, applicable from September 1, as part of its fiscal consolidation programme.

    Despite the current gloom, Winzen held out hope that auto demand in France, Italy and Spain auto could stabilize towards the end of next year, helping beleaguered carmakers like Peugeot (PEUP.PA) and Fiat FIA.MI.

    “Economists tend to underestimate not only recessions but also recoveries, and if we no longer wake up wondering what terrible news about the euro zone awaits us, then there is significant pent-up demand just waiting to be released once things quiet down,” he said.

    The Spanish government introduced a new car subsidy scheme October 1 to stimulate the battered market in the economic downturn. Industry association ANFAC said the plan would be reflected in sales over the next few months.

    “There is light at the end of the tunnel and we don’t think it’s coming from oncoming traffic,” Winzen added. (Editing by Hans-Juergen Peters)

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