Wednesday, March 16, 2005

New car sales in Europe record worst February in a decade

BMW, GM and some Asian carmakers increase share of a weak market

By Michael Shields / Reuters

Copyright © 2004 Reuters Ltd. Click for Restrictions.

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FRANKFURT - New car sales in Europe had their worst February in a decade, extending the year's weak start as consumers worried about jobs kept well clear of dealer showrooms.

Registrations of new cars fell 4.1 percent in Europe to 1.05 million units in February. Excluding the new EU members, sales of just 1.0 million units marked the slackest February since 1995, according to auto industry group ACEA.

The numbers dashed any hopes for a rebound after January sales failed to sustain a late 2004 rally fuelled by incentives and extra selling days that masked underlying frailty in the retail car market.

"I think we are learning that it is not going to get better. It is a different attitude in western Europe for consumers buying cars. If everyone is concerned about his pension, one area where you can save money the easiest is on cars," said Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst.

In addition, sales to retail customers are declining while lower-margin fleet sales to commercial clients are on the rise, especially in Germany, Europe's biggest car market, he added.

The headline ACEA figures include the European Union -- excluding Malta and Cyprus -- plus European Free Trade Association members Norway, Switzerland and Iceland.

Including just the 15 legacy EU members plus EFTA states, registrations fell 3.1 percent year on year.

"This result points out a slow start to the year in an economic context that remains sluggish," ACEA said, saying the number of working days was not a factor.

Registrations in the broader group of countries slipped 2.3 percent in the first two months of the year.

Weak sales are making life hard for carmakers already battling a strong euro, high raw materials prices and excess capacity that is driving prices lower in a buyers' market.

Carmakers are hoping that a raft of new models will boost sales as the year goes on. Volkswagen, for instance, will roll out eight new or updated models in Germany in 2005.

But analysts are waiting to see tangible proof of an upturn.

"We note that February is one of the least important seasonal months but with two consecutive months running below (adjusted annual rates of) 14 million units, we see increasing risk that 2005 western European sales fail to grow from 2004 levels," Morgan Stanley said in a note to clients.

German premium carmaker BMW bucked the trend, boosting European registrations 23.9 percent, while registrations for arch-rival DaimlerChrysler dropped 9.6 percent.

BMW is milking the biggest new product offensive in its history, including its well-received 1-Series compact. It is counting on another boost from the launch of its new 3-Series model, which hit dealer showrooms this month.

Chief Executive Helmut Panke told BMW's annual news conference he expected record first-quarter car sales, but forecast only flat 2005 earnings given the strong euro and rising prices for raw materials like steel and plastics.

DaimlerChrysler has blamed weak sales of its flagship Mercedes-Benz cars on problems with faulty diesel pumps and impending model changeovers, which tend to postpone sales.

Group registrations for struggling Italian carmaker Fiat decreased 16.7 percent, led lower by the ageing lineup of its Fiat brand cars. Renault's sales retreated 12.8 percent compared to a robust February last year.

South Korea's Kia Motors again led growth by Asian manufacturers, with registrations up 69.1 percent last month. Its share of the European market rose to 1.4 percent from 0.8 percent a year earlier.

Other Asian carmakers turned in mixed showings.

Toyota's registrations, including its luxury brand Lexus, fell 9.6 percent and blunted its steady advance in Europe, reducing the world's number two carmaker's market share to 5.4 percent.

Nissan and Mazdasales also fell, but Mitsubishi , Honda and Suzuki grabbed more market share.

General Motors, the world's biggest carmaker, boosted its European market share to 10.5 percent from 9.8 percent thanks to gains by its Opel and Vauxhall brands.