J.D. Power Automotive Forecasting on Friday reduced its forecast for west European car sales in 2008 and 2009 and now expects falls of 4 percent and 1.3 percent respectively.
"Car sales in western Europe fell by 8.8 percent in June. The June result underscores signals of deteriorating demand in a number of European countries and has led us to cut expectations for the remainder of 2008 and for 2009," it said in a statement.
"A further risk to volumes may be emerging in the form of rising vehicle prices, though it is unclear at this time whether (carmakers) will be at liberty to pass on rising costs of raw materials," it added.
J.D. Power said that West European car demand is now showing some sign of slowdown as a result of the 'toxic' mixture of falling asset prices, slowing global and European economic growth, financial crisis and rising inflation.
It said consumer confidence continued to decline in June across the region.
"In national car markets, some countries have fared better than others but it is clear that some large markets such as Spain, Italy and the UK will significantly detract from the broader total, while others may struggle to keep level with 2007, providing little room for positive offsetting performances," it said.
"The recent deterioration, which underlies our cut in 2008 expectations to a decline of 4 percent to 14.21 million vehicles, looks likely to continue into 2009 when a further fall is now expected to 14.02 million cars."
It had previoulsy expected 2008 car sales in the 17 West European nations to decline 2.1 percent to 14.49 million cars. The recent increase in eurozone interest rates provided a further headwind to the region's car markets, it added.