May Sales In Europe Spurt, But Bad Vibes Build For 2010

Government scrapping incentive schemes have rescued Western European car sales for the moment, but investors believe this has mainly been achieved by bringing sales forward and expect 2010 to be the year when reality will assert itself.

John Lawson, analyst with Citigroup Global Markets, said Western European sales were down just four per cent in May for an impressive annual selling rate of 15.5 million. But 2010 will be payback time.

“Forecasts which once feared a 15 to 20 per cent fall in 2009 in European sales are being revised upwards because one in five European cars sold are currently benefitting from government incentives. It looks increasingly likely that 2009 will show modest contraction of sales of about five per cent, raising the likelihood of a contraction in 2010 when most support, notably German, will be withdrawn,” Lawson said.

J.D.Power, in a report saying Western Europe sales fell by 4.2 per cent in May, said German sales were up nearly 40 per cent, but the bell tolls for 2010.

“In the midst of the most severe recession in generations this is a remarkable result, but it marks a situation that will not likely be sustainable beyond 2009,” said J.D.Power analyst Pete Kelly.

“Germany is not likely to see a renewal (of the scrapping scheme) after 2009. As a result the West European market will suffer, simply as a consequence of the likely fall in sales in Germany in 2010, a fall of over one million units, all other things being equal. This leads us to the view that sales in 2010 will be down significantly on the 2009 level, perhaps falling to, or even below, 11.5 million units next year, after achieving a full-year total of around 13 million in 2009,” Kelly said. a