European car sales show signs of tepid recovery

Munich

EUROPEAN car sales showed first signs of a tepid recovery in May as showrooms reopened after a two-month shutdown because of the coronavirus pandemic.

New auto registrations across the region fell 57 per cent year-over-year, the European Automobile Manufacturers Association said Tuesday. While that's the worst May since the group started tracking the data in 1990, it's an improvement over the 78 per cent plunge in April.

The exact shape of a potential recovery is still unclear as carmakers from Volkswagen AG to Fiat Chrysler Automobiles NV prepare to announce results for what likely will be a devastating second quarter. In the US, Ford Motor Co forecast a US$5 billion loss for the three months through June.

The industry is hoping that consumers will drive an improvement this summer by turning to cars for their holidays instead of flying to far-away destinations. US customers bought sport utility vehicles and trucks in droves in May, spurring a sales rebound. Another positive signal is coming from China, where car sales rose for the first time in almost a year last month. The region has become a focus for European automakers who are hoping better business there will make up for muted registrations at home.

Sales have dropped 43 per cent during the first five months of the year, in a sign that a rebound will take some time. European car sales are forecast to decline by as much as a fifth in 2020, according to Bloomberg Intelligence's Michael Dean.

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All European countries showed double-digit percentage drops last month, though some did better than others. Germany's registrations declined by about half, while Spain's fell almost 73 per cent .

Companies are cutting costs wherever possible. France's Renault SA announced in May it would reduce staff levels worldwide, while German automotive supplier ZF Friedrichshafen AG said it plans to cut as many as 15,000 positions. In total, Europe's automotive industry has announced more than 50,000 job cuts since the start of the pandemic, according to data compiled by Bloomberg.

Automakers and dealers still have high inventories. With production ramping up again, surplus cars are threatening to pile up if sales don't recover quickly, which could lead to even more job cuts as companies try to find a way to afford the glut. BLOOMBERG