Europe's car industry continues slow recovery

Munich

EUROPE's car industry extended a tentative recovery for a second straight month, leaving manufacturers and dealers hoping state subsidies will help spur a stronger rebound.

New passenger-car registrations fell 24 per cent in June, the European Automobile Manufacturers Association said on Thursday. That's an improvement on May's 57 per cent slump and April's 78 per cent drop.

With sales still well below last year's levels, hopes are fading for the more V-shaped recovery seen in China. Germany's Volkswagen AG on Tuesday sought to temper optimism, telling workers in a staff newspaper that it's put a freeze on new hiring despite a pick-up in orders.

"The recovery is slow but not quite as slow as we thought", Bankhaus Metzler analyst Juergen Pieper said in an email. "It looks like July could be the first almost normal month".

Auto manufacturers across Europe have been cutting costs and jobs to defend profit margins.

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Governments are trying to entice customers back to showrooms with incentives targeted at environmentally friendly cars. Lease prices for some battery-powered cars have plummeted. The efforts have seen first results. France saw sales rise by 1.2 per cent - the first rise since the pandemic started - after the state introduced incentives at the beginning of June. Most other countries in the region, including Germany, Italy, Spain and the UK, still saw double-digit declines.

Globally, car sales are recovering as economies exit strict lockdowns. The China Association of Automobile Manufacturers said last week that the outlook for this year is improving, predicting a drop of 10 per cent to 20 per cent for the year. In Europe, car sales are expected to fall 20 per cent, according to a forecast by Bloomberg Intelligence. BLOOMBERG