Europe car sales hit record low for February over supply snarls

[STOCKHOLM] Car sales in the European Union (EU) skidded to the lowest on record for February, as manufacturers brace for more disruption to output from supply-chain issues exacerbated by the war in Ukraine.

New-vehicle registrations in the EU fell 6.7 per cent to less than 720,000 for the month, the European Automobile Manufacturers' Association said on Thursday (Mar 17). When including the UK and free-trade association countries, sales were down 5.4 per cent. That's a steeper drop than in January and extends the industry's streak of declines to 8 months.

"European auto demand was already tepid before Russia's invasion of Ukraine led to production halts and components shortages that will further delay a recovery of European auto sales in 2022," Bloomberg Intelligence analysts led by Michael Dean said in a note.

The industry faces a difficult year as lingering shortages of semiconductors, the war in Ukraine and fresh Covid outbreaks in China put further strain on already stretched supply chains. Bloomberg Intelligence expects sales in Europe to at worst remain flat this year, down from its earlier estimate of as little as 5 per cent growth.

While markets including Germany and Spain reported modest growth for February, Italy and France recorded double-digit declines. While Russia's invasion of Ukraine didn't have a major impact on sales last month, that will change going forward. Ukraine is a key source of wire harnesses that power automotive electrical systems. Plant shutdowns in the country could lower European car production by as many as 700,000 vehicles in the first half, Colin Langan, an analyst at Wells Fargo & Co, said in a report this week.

Volkswagen (VW) and BMW have already idled factories due to the supply disruption, while Mercedes-Benz has reduced output at a German factory. VW warned this week it will have to revise its outlook if it's unable to get wire harnesses for more than 3 or 4 weeks.

Stellantis and VW were among carmakers that struggled last month, with registrations declining 17 per cent and 12 per cent, respectively. Toyota Motor Co and BMW grew sales 4.7 per cent and 1.3 per cent, respectively. Hyundai Group was a standout with a 25 per cent gain.

Automakers have tried to weather the supply crises by prioritising their highest-earning models and raising prices. BMW on Wednesday said operating returns for its automotive business will remain robust this year, even as the war in Ukraine and the chip crisis continue. BLOOMBERG