Europe car sales return to growth after painful year of declines

EUROPE’S new-car market returned to growth in August for the first gain in 13 months, though the respite may be short-lived as record inflation and an unprecedented energy crisis threaten to put off buyers.

Registrations rose 3.4 per cent to 748,961 vehicles last month, the European Automobile Manufacturers’ Association said on Friday (Sep 16). Germany’s Mercedes-Benz was among the best performers, with a 16 per cent jump from a year ago. 

Carmakers are seeing glimmers of improvement with some supply-chain constraints such as the lack of semiconductors beginning to ease. Even so, runaway inflation and a slowing global economy are clouding sales forecasts. Last month’s showing compares to poor year-earlier performance and remains well below pre-pandemic levels.

“High inflation, rising interest rates and waning consumer confidence, coupled with customers extending the replacement cycle amid the improved reliability of newer cars and swiftly changing technology may challenge underlying demand in 2023 and beyond,” Bloomberg Intelligence’s Gillian Davis said in a note this week.

Forecasting vehicle purchases remains difficult as consumers worry about surging energy bills and the risk of rolling blackouts as Russia cuts gas deliveries. Authorities in Germany, Europe’s biggest auto market, this week urged industrial consumers to cut their gas consumption. One of the German car industry’s biggest polymer suppliers is cutting production in Europe because of excessive energy costs.

The cost of energy and rising interest rates squeezing car buyers are likely to cap high vehicle prices that gained when semiconductor shortages curtailed car availability. European Central Bank officials have said they expect to raise borrowing costs further at their next several meetings after last week’s jumbo rate hike.

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Registrations grew by 3 per cent in Germany, 3.8 per cent in France and 9.1 per cent in Spain. BLOOMBERG