Car sales jump fails to halt forecourt price war
Europe's car sales recovery may be taking hold, according to registrations data published yesterday, but a confidential industry survey shows the pick-up is failing to halt a price war.
Discounts outgrew first-quarter sales, according to the data seen by Reuters, casting doubt on the strength of the recovery and the earnings outlook for carmakers in the region.
Registrations rose 10.4pc in March, the Association of European Carmakers said, rounding off an 8.1pc gain for the first three months, after six straight years of contraction.
But average retail incentives jumped 12pc to almost €2,750 ($3,800) per vehicle in the five biggest markets, the findings of a major market researcher show.
"There should be significant concern about artificial growth," said Ernst & Young senior automotive partner Peter Fuss, citing discounts, government incentives and cut-price sales of unused vehicles as 'nearly new'.
The industry's bottom line "continues to be under severe pressure", he said. Ernst & Young was not involved in the market research.
PSA Peugeot Citroen saw its European sales volume rise in line with the market last month and for the first quarter overall.
The French carmaker – which disappointed investors this week with a recovery plan targeting a 2pc operating margin for 2018 – is also among the heaviest price-slashers.
Retail discounts topped €3,000 per Peugeot vehicle, according to the survey data, and more than €3,750 per Citroen across Germany, Britain, France, Italy and Spain, where combined registrations grew slightly slower than Europe as a whole.
Mass-market carmakers in the region are still struggling to cover the fixed costs of excess capacity, including unused production lines and underemployed workers.
And while the market is expected to grow about 3pc in 2014, forecasters say sales are unlikely to return to pre-crisis levels for years. Pricing, as a result, may never be the same.
"In the wake of the 2008 financial crisis, consumers are without a doubt more value-sensitive," said Allan Rushforth, Hyundai's head of European operations. "For the moment the incentive levels are at an all-time high."
Peugeot's latest 208 subcompact attracts a discount of 17pc in France – with an old car traded in – and 20pc at German dealers. (Reuters)