European car sales plunge in August, deepening industry woes

Munich

EUROPEAN car registrations fell sharply in August, deepening the woes of an industry battling sluggish demand in key markets and the challenge of rolling out electric vehicles.

Sales dropped 8.4 per cent, the steepest decline this year, according to the European Automobile Manufacturers Association.

The fall was partly due to exceptionally high growth in the same month a year earlier as manufacturers rushed out models ahead of tough new emissions-testing rules.

The ongoing issues in the car industry are hitting Germany in particular, but there are signs of weakness in manufacturing across Europe.

Euro-area economic growth is forecast to slow to 1.1 per cent this year from 1.9 per cent in 2018, which would be its worst performance in six years.

The weakness in industry hasn't had a dramatic impact on the labour market so far. If that changes, and unemployment starts to rise, that would mark a step up in the seriousness of the slowdown.

It would also have a further damaging impact on car sales as consumers rein in big-ticket purchases.

In addition to the risk of a recession in Germany, carmakers are also facing a slowdown in the Chinese car market.

European sales over the year to date are down 3.2 per cent and the continent's five biggest markets all contracted in August, with Spain and France posting the biggest slowdowns.

The industry's predicament took centre stage at the Frankfurt auto show, where thousands of protesters demanded political and industry action to combat climate change. The head of Germany's auto lobby group also unexpectedly announced his resignation last week.

Carmakers at the show displayed their new electric models, which will become crucial in coming months as the companies race to meet new European carbon-dioxide emissions rules.

Carlos Tavares, head of the ACEA and chief executive officer of Groupe PSA, last week called for more charging infrastructure to encourage consumers to buy the vehicles.

Nissan Motor Co and Fiat Chrysler Automobiles NV saw the biggest slowdown in August sales at 47.5 per cent and 26.5 per cent respectively.

Europe's July sales increase, one of only two monthly gains in 12 months, was almost entirely down to Central European countries, the association said. Only Germany showed positive growth that month among Western European countries.

After the August 2018 boost, sales dropped dramatically overall and have failed to pick up since, with the association forecasting a 1 per cent drop for the year. BLOOMBERG