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European car sales at their weakest in 5 years on Brexit uncertainty

London

EUROPEAN car sales turned in their weakest performance in the first quarter since an industry-wide contraction five years ago, as UK consumers' apprehension over Brexit continued to erode demand in the region's second-largest market.

First-quarter registrations edged up 0.6 per cent, according to figures released on Wednesday by the Brussels-based European Automobile Manufacturers' Association, or ACEA.

The gain was the slowest since the second quarter of 2013, when the region was in the throes of a downturn. A 5.2 per cent downturn in March, led by drops in three of the five biggest markets - Germany, the UK and Italy - suggests that "momentum is starting to slow", the ACEA said.

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Car sales dropped in March at eight of the 10 top-selling carmaking groups, with the steepest declines at Ford Motor Co, Fiat Chrysler Automobiles NV, BMW AG and Nissan Motor Co, the ACEA said.

The slide has been particularly acute in the UK, where car sales were down 16 per cent in March and 12 per cent for the quarter. Part of that can be blamed on extreme winter weather and an April 2017 increase in vehicle taxes that led to a spate of purchases last March.

But Brexit is an ongoing drag, said Ian Plummer, manufacturing and agency director for new and used-car listing site Auto Trader. The lack of an agreement between the European Union and the UK on how the country's pullout from the trade bloc should proceed is making businesses less willing to plan on expansion or hiring.

"Not only has it severely dented consumer confidence, but falling exchange rates has reduced the scope for manufacturers to entice consumers with strong offers due to the impact of a falling pound on the profitability of cars sold in the UK," he said in an e-mail. While consumer spending in Britain declined in February and March, according to credit-card provider Visa, the regional economy is also slowing.

Economic gauges in the euro area have missed estimates. In Europe's biggest automotive market, two German research institutes posted figures on Tuesday indicating a slide in investor confidence and a rising risk of recession.

The weakening in Europe's largest economy is partly tied to the trade tensions between the EU and the US. The ACEA said in January that it expected sales growth to decelerate this year. PSA Group CEO Carlos Tavares, who heads the industry group, said at the time that major EU legislation on CO2 targets and the threat of Brexit are weakening the car market's recovery.

The European automotive market remains "stable", executives at PSA, the owner of Peugeot, Opel and Vauxhall brands, said in an earnings presentation in March. BLOOMBERG