U.S. News

Premium Brands Can't Stop European Car Sales Dip

By Reuters

European new car registrations stagnated in December as a sharp rise in German car sales that benefited mainly domestic luxury brands failed to offset weaker demand in other key markets, industry data showed on Tuesday.

December registrations edged 0.3% lower to 1.07 million vehicles, according to figures published by the Brussels-based automotive industry group ACEA.

The slight weakness seen last month brought the total number of European new car registrations for the full year to 15.36 million -- a gain of 0.7%.

"Two working days less with respect to December 2005 across the whole region negatively contributed to this result," ECEA said of the December figures in a statement.

"Buyer uncertainty, fed by fuel price fluctuations and rising interest rates were -- in addition to the lack of new models -- the most frequently evoked factors affecting these markets in 2006," it continued.

Nearly all the major mass-market brands, including Volkswagen, Renault, Peugeot and Opel, suffered a faster drop in sales than the rest of the market, which featured sharp gains in premium brands.

Moreover, low-cost, volume brands from South Korea like Hyundai and Kia that had been racking up gains in deliveries to customers throughout last year suffered double-digit declines of 14% and 18% respectively in December.

Fiat, whose Grande Punto subcompact has enjoyed strong success, was a notable exception as the group's sales figures recover from the core brand's weakness in past years.

Toyota, expected to overtake General Motors as the largest carmaker in the world this year, also grew faster than the market.


The month however belonged to German premium brands Audi, Mercedes-Benz and BMW, which appeared to gain from a frenzied rush to buy new cars before the largest tax hike in the history of post-war Germany took effect at the beginning of January.

While Audi posted a 14% gain, Mercedes enjoyed a 21.5% rise in new registrations last month. BMW finished off the strong showing with a 23.5% increase.

In fact, the Munich-based carmaker's BMW brand outsold volume brand Toyota last month, or to put it differently, had stronger demand than Volkswagen's mass-market nameplates SEAT and Skoda combined.

Overall, German new car registrations rose 18%.

"This surge in purchases, ahead of the sales tax increase, was also fuelled by new products, incentives and reinforced private consumer confidence," the ACEA said.

Renault's poor performance in 2006 continued into the last month of the year, with new car registrations slumping 21% in December to end down 12% for the year.

Its core Renault brand, once the best-selling marque in Europe, almost fell to fourth place behind even the Ford brand, highlighting just how much the ageing of its Megane and Scenic compact models has hurt demand for the French firm.