Europe's uninspiring car sales turn ugly amid chip crunch

Brussels

AUTO sales are deteriorating in Europe, with months of meek recovery giving way to deliveries that no longer even measure up to last year's pandemic-depressed results.

New-car registrations fell 18 per cent in August and 24 per cent in July from year-ago levels, the European Automobile Manufacturers' Association said on Thursday. Sales are now up just 13 per cent for the year, less than half the percentage increase posted at the year's halfway point.

Auto production is being suppressed by the global semiconductor shortage that the chief executives of Volkswagen AG, Daimler AG and BMW AG have warned will linger well into next year.

And if scarce inventory weren't enough to drive up prices, carmakers also are prioritising their most lucrative models as the number of vehicles they can produce is constrained.

"The chip shortage is causing production losses, and demand that's actually high can't be met," EY said in a note. "Traditional combustion vehicles have been hit the most, while the boom for plug-in hybrids and electric cars continues."

The July and August figures are the worst for the two months since the tail end of the Eurozone economic crisis in 2013. The declines were broad-based, with Europe's biggest car markets - Germany, France, the United Kingdom, Italy and Spain - all seeing double-digit drops each month. Spain performed worst in August with sales plunging 29 per cent, followed by Italy with a 27 per cent drop.

So far, automakers have been holding up just fine. First-half earnings, margins and cash flows were the highest in the industry's history, Bernstein analyst Arndt Ellinghorst said in a report on Wednesday.

"Isn't autos a funny industry," he wrote. "The fewer cars OEMs sell, the more money they make."

Among the largest automakers, European sales fell 14 per cent for VW Group, 29 per cent for Stellantis NV and 23 per cent for Renault SA last month. Registrations dropped 38 per cent for Daimler AG and 18 per cent for BMW AG. BLOOMBERG