GM, Renault Lead Monthly Drop in European Car Sales

14 Jun 2007 • by Natalie Aster

General Motors Corp. and Renault SA led a fourth consecutive monthly decline in European car sales in May after a sales-tax increase in Germany, reported The Bloomberg.

New car registrations dropped 1.6 percent to 1.44 million vehicles from 1.47 million a year earlier, the Brussels-based European Automobile Manufacturers Association said today in an e- mailed statement. Five-month sales declined 0.6 percent to 6.96 million vehicles.

In Germany, Europe's largest car market, registrations fell 11 percent after the sales tax rose to 19 percent from 16 percent at the start of the year. Rising fuel prices and longer-lasting vehicles also are contributing to the European sales decline, as is consumer willingness to wait for rebates and incentives, said Marc-Rene Tonn, an M.M. Warburg analyst in Hamburg.

``Demand from private customers is not a bright spot in Europe,'' Tonn said. ``The average age of cars on the road is increasing and buyers are waiting longer and longer to trade them in.''

Cars on German roads are more than eight years old on average, according to the country's automobile manufacturers association. The price of unleaded fuel in France has increased about 11 percent since the beginning of the year, according to the French Economics Ministry.

The threat of rising interest rates in the U.K., falling housing prices in Spain and the higher sales tax in Germany are creating a ``perfect storm of uncertainty'' for consumers in Europe, said Thomas Aney, an analyst at Dresdner Kleinwort in Frankfurt, who expects the market to start to improve in the second half.

Sales at Renault, France's No. 2 carmaker, fell 8.4 percent to 123,883 units. The carmaker will bring the new Twingo small car and Laguna midsized model to showrooms in the second half of the year. Boulogne-Billancourt, France-based Renault is aiming to improve sales of larger, high-margin vehicles in western Europe, as well as its no-frills Logan sedan in emerging markets.

GM's European sales declined 8.9 percent to 140,365 vehicles, led by a 12 percent plunge at the Saab luxury brand. Ford Motor Co., the world's third-largest carmaker, reported a 1.1 percent drop to 150,877 units.

GM has staged a series of job cuts in Europe in the past decade to revive earnings. The Detroit-based carmaker is eliminating 11,500 jobs in Europe between late 2004 and this year.

Shares of Renault rose as much as 2.2 percent to 111.42 euros and were up 1.7 percent at 1:29 p.m. in Paris. GM's German-traded shares were up to $32.13 from yesterday's close of $32.10 in New York.