Chinese growth eases sting of another drop in Europe auto sales

By BLOOMBERG

MUNICH • European car sales declined for a seventh straight month, though the drop was overshadowed by a rebounding economy in China, the world’s largest market.

Automotive shares rose after China beat expectations for first-quarter growth.

Volkswagen AG (VW), which sells about 40% of its vehicles there, led gains with a 1.6% rise with similar rise in the Stoxx Europe 600 Automobiles & Parts Index.

VW CEO Herbert Diess and Nissan Motor Co Ltd’s China head Makoto Uchida — both speaking at the Shanghai auto show this week — said they expect the Chinese market to pick up in the second half of the year.

Automobile sales in China shrank last year for the first time in more than 20 years.

An uptick in China would offer positive momentum in a global car market pullback, with Europe so far showing little sign of recovering since September, when new emissions tests caused turmoil.

Italy — where the economy is already shrinking — may weaken further, while contracting car sales in Spain are in line with forecasts for a slowdown for an economy that’s been resilient so far.

Germany, the continent’s biggest market, barely skirted a recession at the end of last year, and prospects for recovery remain dim.

Registrations in Europe dropped 3.6% in March to 1.77 million cars, the European Automobile Manufacturers’ Association (ACEA) said yesterday.

Italy led the declines among major markets with a drop of almost 10%, followed by Spain.

“An improvement in new car registrations isn’t on the horizon in light of the bleaker economic environment, the endless Brexit debate and political risks,” EY said in a report.

For the quarter through March, sales fell 3.2% in the European Union (EU) and European Free Trade Association countries, the ACEA said.

A softer market adds to headwinds for carmakers battling sliding profits that prompted BMW AG to intensify measures designed to save €12 billion (RM56.16 billion) by 2022.

In the meantime, rival luxury carmaker Daimler AG is looking for cost reductions as well.

Pressures are set to intensify in the EU next year with tighter regulation on carbon dioxide (CO2) emissions, while uptake of electric vehicles remains at a fraction of total deliveries.

The industry may face EU penalties of €30 billion, with VW still working on reducing a deficit on CO2 goals, Diess said on Tuesday. — Bloomberg