Phantom car sales in Germany show extent of European debt crisis
Self-registrations to dealers, automakers rose 11% in the first half
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FRANKFURT (Bloomberg) -- Germany, Europe's largest car market, has managed to buck the trend for falling new-car sales in Europe this year.
In the first six months, the market grew 0.7 percent in comparison with a 20 percent decline in Italy and a 14 percent fall in France, according to industry association ACEA, which predicts that car sales in the European Union will fall this year to the lowest level since 1995.
But the German market isn't as strong as it looks. With the debt crisis suffocating car demand in other markets, automakers are pushing for sales in Europe's biggest economy regardless of whether customers are really interested in buying.
In June, 87,454 vehicles were registered to dealers and carmakers, rather than consumers, representing 29 percent of the market, according to data from German auto-dealer group ZDK. These so-called self-registrations totaled 479,385 in the first half, an 11 percent jump from a year earlier.
Discount 'bloodbath'
To get self-registered vehicles off dealer lots, many are quickly sold as zero-kilometer used cars at discounts of more than 20 percent, according to Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.
These phantom sales reflect the pressure to cut prices that's spread from southern Europe to stronger markets such as Germany and the UK.
"It's a bloodbath from a discount point of view," said Andy Palmer, executive vice president for global planning at Nissan. "We work in an industry that needs volume -- it needs to move metal -- so manufacturers discount."
Even premium carmaker BMW is feeling the pressure. Despite the fact the German carmaker targets traditionally recession-resistant wealthier customers and has forecast record sales this year after introducing a revamped 3-series sedan in February, it's not hard to find a bargain on a new BMW.
Targeting Germany
The car Web site mobile.de has dozens of offers from Italy, such as a latest-generation BMW 316d listed this week by a dealer in the northern town of Tavagnacco for 28,400 euros ($34,900), 16 percent below the German sticker price.
And it's not uncommon for customers to walk into German showrooms brandishing online quotes from abroad, demanding that salesmen meet their prices.
Werner Entenmann, who runs a BMW dealership in Germany's wealthy southwest, has long made a comfortable living selling luxury sedans to well-heeled Germans at or near list price. This summer, more buyers are bargaining.
"Every day customers are coming to our showroom with offers from other brands or other BMW dealers," said Entenmann, whose Autohaus Entenmann near Stuttgart sells about 2,200 cars a year. "This is part of our daily routine." Profits, he said, are down as the discounts eat into margins.
And BMW isn't the only premium carmaker being heavily discounted. A dealer in Rome listed a Mercedes-Benz C200 CDI wagon with automatic transmission, leather seats and alloy wheels on mobile.de for 33,499 euros, 22 percent off the German list price.
With more Germans seeking bargains, average new-car rebates in Germany jumped to 12 percent of the sticker price in July, the highest rate since at least August 2010, according to trade publication Autohaus PulsSchlag. Italy's Fiat had the steepest discounts in the country with 14.7 percent, followed by France's PSA/Peugeot-Citroen and Renault both at 14.1 percent on average.
Slowing growth
"Everyone is chasing the last remaining consumers in Europe, and all the cars that can't be sold somewhere in the south are now being shipped to Germany," said Arndt Ellinghorst, a London-based analyst with Credit Suisse.
Automakers have been hit hard by the region's slowdown. The 13-member Euro Stoxx Autos and Parts Index has dropped 6.6 percent over the past six months, led by a 48 percent plunge by PSA, which posted a loss of 662 million euros at its auto unit in the first half. BMW declined 15 percent.
'At all cost'
"Many of our competitors are drastically pursuing volume and market share -- to some degree at all cost," said Doug Speck, sales and marketing chief at Volvo Car Corp. While self-registering vehicles boosts sales in the short term, "it's false euphoria," he said.
BMW's car prices have slipped 1 percent to 1.5 percent on average this year, Chief Financial Officer Friedrich Eichiner said on an Aug. 1 conference call -- though those figures wouldn't include most self-registered vehicles sold at a deep discount.
A wagon version of the new 3 series, to be introduced in September, should help the company counter pressure to reduce prices further in Europe, Eichiner said.
That may not be enough for Entenmann. The salesman, who also heads BMW's dealer association in Germany, is considering asking the carmaker to cut prices and ease requirements that dealers buy specified amounts of advertising in local media.
"If the situation deteriorates further," he said, "BMW has to help the dealers save costs."
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