European car sales hit 20-year low for May

[June 19, 2013]  MILAN (AP) -- 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 percent 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 percent 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 percent in the first quarter of this year -- the sixth such decline in a row -- and unemployment is at 12.2 percent. Meanwhile, the wider 27-country EU has also seen its economy slide into recession, shrinking 0.1 percent 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 percent this year -- after sliding to 12 million and 1995 levels last year -- although some executives are reckoning with at least a 5 percent 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 percent in May. In Europe's other leading car markets, the picture was just as bad: Italy was down 8 percent, France saw a 10.4 percent drop, and Spain was off by 2.6 percent. Britain was the only major car market to post growth, up 11 percent.

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 percent from 21 percent 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 percent drop in brand sales and 5.9 percent decline for the group. Sales of Mercedes brand were up 2.8 percent, while BMW brand sales declined 8.1 percent.

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

[Associated Press; By COLLEEN BARRY]

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