European car sales edge closer toward the cliff

We heard warnings earlier this year that western European new-car sales would fall off the cliff in 2010. Well, the edge of the cliff appears much closer after the release of April sales numbers in key markets.

In post-scrappage Germany, year-on-year car sales plunged 32 percent last month, confirming industry watchers' fears that 1 million fewer cars will be sold in Europe's biggest market this year compared with 2009. Sales in Italy dropped 15.7 percent to a 14-year monthly low as the effects of continuing economic uncertainty and the end of scrappage benefits kept consumers out of showrooms.

France's sales rise slowed to 1.9 percent as the government reduced incentives that encourage people to buy greener cars. Spain was a bright spot with sales leaping nearly 40 percent. The UK, whose scrappage scheme ended on March 31, posted growth of 11.5 percent for April, much less impressive than a 26.6 percent rise registered in March.

Growing sales of premium cars and light commercial vans are helping some automakers. But the good news ends there.

IHS Global Insight analyst Colin Couchman said sales are likely to start declining in the UK and France by July as the effects of government incentives wear off.

"This time last year European sales, especially in Germany, were at a relatively high point thanks to scrappage incentives. The dramatic fall off in Germany and Italy was entirely expected," said Couchman, who is responsible for western European car industry analysis.

Expected -- but it hurts and it's going to hurt much more very soon.

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