European car sales hit lowest mark for May in 20 years

MILAN – European car sales had their worst May in 20 years as the region’s recession drags on, the European automakers’ association said Tuesday.

Passenger car demand for May dropped by 5.9 per cent on the same month last year in the 27-country European Union to 1.042 million units, the lowest level for that month since 1993 when sales dropped below 1 million, according to new figures released by ACEA. For the first five months of the year, sales dropped 6.8 per cent to 5.07 million.

After hitting a 17-year low in 2012 with a little over 12 million new registrations, European passenger car sales have continued to sag as the European economy struggles to recover from its debt crisis.

The economy of the 17 European Union countries that use the euro shrank by 0.2 per cent in the first quarter of this year — the sixth such decline in a row — and unemployment is at 12.2 per cent. Meanwhile, the wider 27-country EU has also seen its economy slide into recession, shrinking 0.1 per cent in the first three months of 2013.

Europe’s recession has hit carmakers especially hard, as consumers put off purchases of high-ticket price items like cars under rising unemployment. Automakers have announced factory closures and put off new car launches in a bid for survival and to return their struggling European operations to profitability.

The results come after April offered a brief respite, with a slight increase in sales due to an extra two work days compared with a year earlier, not a change in consumer heart. Analysts have forecast sales will drop another 3 per cent this year — after sliding to 12 million and 1995 levels last year — although some executives are reckoning with at least a 5 per cent decline. That would be the sixth consecutive year in decline.

Nonetheless, IHS Automotive analyst Carlos da Silva sees the situation in Europe stabilizing.

“After five months, the situation remains tense,” da Silva said. “Yet, for the second month in a row the rate of decline is slowing down. This means that sales are stabilizing trend-wise.”

Even in Germany, Europe’s strongest economy, car sales dropped to a worrying 9.9 per cent in May. In Europe’s other leading car markets, the picture was just as bad: Italy was down 8 per cent, France saw a 10.4 per cent drop, and Spain was off by 2.6 per cent. Britain was the only major car market to post growth, up 11 per cent.

The head of Italy’s association of foreign carmakers, Romano Valente, urged the government to resist raising the value-added tax on car sales. The tax is scheduled to increase to 22 per cent from 21 per cent in July. Officials have said it will raise 4 billion euros ($5.33 billion), but conservative lawmakers in the cross-party coalition are opposed, claiming it will hit sales of big-ticket items harder.

Mass-market carmakers — PSA Peugeot-Citroen, Renault, Ford, General Motors and Fiat — all suffered double-digit declines in May. Germany’s Volkswagen saw its sales drop at a slightly lower rate — a 2.8 per cent drop in brand sales and 5.9 per cent decline for the group. Sales of Mercedes brand were up 2.8 per cent, while BMW brand sales declined 8.1 per cent.

Jaguar/Land Rover and Japan’s Mazda resisted the crisis with a 9.8 per cent and 30 per cent increase in sales, respectively, but on much smaller volumes and a market share of just 1 per cent. Korean automaker Hyundai saw sales rise 1.9 per cent.