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Worries About Greek Crisis Undermine Europe Sales Outlook

Worries About Greek Crisis Undermine Europe Sales Outlook.

“Private demand looks close to saturation point. Buyer fatigue seems to be setting in”

Western Europe’s latest car sales figures pointed to a healthy future, but as the dust settled some analysts reckoned the rally might be petering out, undermined by worries about Greece.

Data from the European Car Makers Association showed June car sales were up 14.6 per cent in Western Europe to 1.3 million, bringing the gain to 8.2 per cent for the first six months of the year to 6.9 million. But additional selling days in June compared with May in most countries distorted the latest figures.

Worries grew that turmoil in the euro currency zone, threatened with breakup by the shenanigans in Greece, might undermine consumer confidence, and turn the improvement into reverse.

“Private demand looks close to saturation point. Buyer fatigue seems to be setting in,” said IHS Automotive analyst Colin Couchman.

IHS Automotive said the recovery is fragile, thanks to Greece. Car sales in Western Europe began to pick up a couple of years ago, finally recovering from the 2008 global great recession.

“The deal that appears to have been reached over Greece’s debt restructuring appears to make a Greek Eurozone exit look less likely but the situation is fluid and is changing all the time. Therefore it is a fact that the level of uncertainty and risk has increased substantially in the recent week,” IHS Automotive said in a report.

Investment bank Morgan Stanley also has it doubts about the health of the European car industry, and sales growth might peter out later this year.

“We remain cautious about the potential size of recovery in Europe, given lack of improvement in French and Italian economic and unemployment data. We continue to believe most the European growth is lower-margin, lower priced rental and self-registration activity, suggesting profit leverage will be less than expected, and year to date growth might not be sustained (in the second half of 2015),” Morgan Stanley said in a report.

LMC Automotive is also worried about contagion from Greece, which it says might leave the eurozone.

“(Greek exit) could impact the banking sector, bond yields and consumer confidence generally. That scenario could well see the Eurozone plunge back into recession, with car market growth in the region unwinding in 2016,” LMC Automotive said.

LMC Automotive cut its forecast for Western European car sales in 2015 to 12.8 million from an earlier prediction of 12.9 million, although the strong first half would mean 2014’s sales of 12.1 million would be beaten easily.

Not everybody is so pessimistic.

Investment researcher Evercore ISI is bullish on Europe and in a report a week ago talked about the potential for a multi-year recovery in Europe after three or four years of flat to down sales. After the ACEA data, Evercore ISI said a solid European recovery is underway, with the latest data all the more remarkable given the bad news out of Greece.

Despite its identification of worrying trends, IHS Automotive retained what it called a “cautious” growth outlook for Europe.

“IHS Automotive expects car registrations (sales) in the (slightly bigger) E.U. to grow by over four per cent year on year to almost 13.1 million this year, still far behind earlier levels and given higher base levels in the second half and the possible fall-out from the uncertainty in Greece lower growth is likely for the rest of the year,” it said in a statement.

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