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Stabilisation Forecasts Underlined By Europe June Sales Figures

But Reuters Reports Improvement Comes At Huge Discounting Cost.

“As long as we have incentives at this level, any bottoming out will be artificial. If carmakers don’t start pulling back soon, the correction may be even sharper”

Most experts seem to think that after the latest figures for the first six months of 2013, car sales in Western Europe have now stabilised, although few seem to think a rally is imminent.

“This (latest data) seems to indicate that West European sales have eventually started to bottom out. Which is, by the way, not the same thing as saying they have started to recover,” said IHS Auto analyst Carlos Da Silva.

ACEA data shows car sales fell 6.6 per cent in the first six months of 2013 in Western Europe. In June the fall slowed to 6.2 per cent.

“By any standards, the region remains a dreadful zone for most manufacturers. The vast majority has already lost a lot of volumes compared to last year – exception Daimler but not by such a comfortable margin. Yet one can take for granted that all of them would definitely sign for a “just-slightly-declining” second half of 2013,” Da Silva said.

Before anyone starts to say that the worst is now over, Reuters reported that the improvement owed a lot to huge discounting that can’t be maintained, suggesting that a downturn in sales might in fact be about to start again. The Reuters report contained some disturbing data, if you are a manufacturer. Reuters found one car buyer who had bought a Hyundai ix35 for €29,619, with an i10 thrown in for free, an effective discount of 25 per cent. Reuters also quoted from confidential market research showing that discounting by mass-market manufacturers jumped 17 per cent in May to an average €2,518 per car in Europe’s five biggest markets. GM’s Opel price cutting reached €3,301 per car between January-May 2013. Peugeot and Citroen discounts were close to that. Ford and Renault were in the mid to low €2,000s.

Discounting must end
Reuters quoted Ernst & Young analyst Anil Valsan saying that cash-burning automakers will have to stop offering discounts within the next few months.

“As long as we have incentives at this level, any bottoming out will be artificial. If carmakers don’t start pulling back soon, the correction may be even sharper,” Valsan said.

Meanwhile LMC Automotive’s June report said the bottom may have been reached in Western Europe.

Deutsche Bank echoed this.

“We expect the outlook for the second half to turn somewhat more optimistic given the recent momentum and weaker comparison base. We expect West European volumes to reach 11.4 million this year, underlying a stable market in the second half,” the bank said.

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