Europe's car sales upturn fails to halt price war

Thu Apr 17, 2014 10:26am EDT
 
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By Laurence Frost

PARIS (Reuters) - Europe's car sales recovery may be taking hold, according to registrations data published on Thursday, but a confidential industry survey shows the pick-up is failing to halt a price war.

Discounts outgrew first-quarter sales, according to the data seen by Reuters, casting doubt on the strength of the recovery and the earnings outlook for carmakers in the region.

Registrations rose 10.4 percent in March, the Association of European Carmakers said, rounding off an 8.1 percent gain for the first three months, after six straight years of contraction.

But average retail incentives jumped 12 percent to almost 2,750 euros ($3,800) per vehicle in the five biggest markets, the findings of a major market researcher show.

"There should be significant concern about artificial growth," said Ernst & Young ERNY.UL senior automotive partner Peter Fuss, citing discounts, government incentives and cut-price sales of unused vehicles as 'nearly new'.

The industry's bottom line "continues to be under severe pressure", he said. Ernst & Young was not involved in the market research.

PSA Peugeot Citroen (PEUP.PA: Quote) saw its European sales volume rise in line with the market last month and for the first quarter overall.

The French carmaker - which disappointed investors this week with a recovery plan targeting a 2 percent operating margin for 2018 - is also among the heaviest price-slashers.   Continued...

 
A Peugeot logo is seen on a car which is displayed at PSA Peugeot Citroen headquarters in Paris April 14, 2014. REUTERS/Benoit Tessier