European car sales rise 8% in February as region's economy revives

The 308, the 2014 European Car of the Year, helped boost Peugeot's sales.
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MUNICH -- European car sales rose by nearly 8 percent percent in February, the sixth consecutive monthly gain, as a gradual economic revival in southern Europe and price cuts helped to boost demand for new models.

Registrations in the EU and EFTA markets increased to 894,730 vehicles from 831,371 a year earlier, industry association ACEA said today in a statement. Two-month sales jumped 6.3 percent to 1.86 million cars.

Most of Europe's major automakers, except Volkswagen's core passenger cars brand, posted gains in February.

PSA/Peugeot-Citreon's registrations increased by 3.5 percent with a 7 percent gain at Peugeot offsetting flat sales at Citreon. Maxime Picat, Peugeot brand CEO, said earlier this month that new models, such as the 308 hatchback that won the 2014 European Car of the Year award, are helping the unit win buyers amid a shift to more upmarket cars.

Sales at Renault Group jumped 11.5 percent, boosted mainly by a 34 percent surge in registrations of its no-frills Dacia brand, which is offering a revamped Duster SUV and Logan sedan. The Captur helped Renault-brand sales rise 4 percent.

Ford boosted deliveries in the region 11 percent as the Fiesta subcomoact and Kuga compact SUV attracted customers. The company said in January that it's increasing Fiesta production at its plant in Cologne, Germany.

General Motors saw sales go up 12 percent, boosted by a 16 percent increase in registrations of its Opel and Vauxhall branded vehicles. Opel is likely to expand 2014 deliveries in the region faster than the forecast 2 percent industrywide growth, as models such as the Adam minicar attract buyers new to the nameplate, Karl-Thomas Neumann, head of the division, said in early March.

Sales of GM's Chevrolet brand, which is being withdrawn from Europe, fell by 5 percent.

VW brand sales fall

Volkswagen group posted a 7 percent rise, helped by a 21.5 increase at its value brand Skoda, a 16 percent jump in Seat sales and an 12 percent gain at its premium brand Audi. VW's performance was weighed down by a 0.8 percent decline in sales at its namesake brand.

Fiat's group sales rose 5.8 percent, helped by the 500L minivan variant of the main brand's 500 subcompact.

Toyota Group posted a 14 percent increase, while Nissan's sales were up 3 percent. Hyundai's volume fell 3 percent in contrast to an 8 percent gain at sister brand Kia.

FULL NUMBERS
Download the PDF for February and two-month sales by automaker and country.

BMW Group sales were up 4 percent with a 7 percent increase at BMW brand countering a 10 percent drop in Mini sales. Mercedes' group sales rose 4 percent with Mercedes brand sales rising 5 percent and Smart falling 7 percent.

Among Europe's five biggest markets, only France saw a fall in new-car sales with registrations down 1 percent, showing that a fragile recovery in the region is gaining momentum. German registrations rose by 4 percent, the UK was up 3 percent and Italy 9 percent. Deliveries in fifth-place Spain jumped 18 percent because of a government program designed to bolster sales by encouraging trade-ins of older vehicles for cars with lower emissions.

From survival to revival

Automotive executives and analysts are predicting that industrywide European car sales will expand by about 2 percent this year but they see discounting as a continuing problem.

Carlos Da Silva, manager of  European light vehicle sales forecast at IHS Automotive, said the February increase confirms that the long-awaited rebound of the European market is on track and automakers can move "from survival to revival mode."

The recovery appeared to be consistent and is well-spread. "All countries and all manufacturers are performing much better," Da Silva said, warning that sales were still inflated by heavy discounting.

Jens Schattner, a Frankfurt-based automotive analyst at Macquarie Group, said the key problem was that future growth may be driven by aggressive pricing. Prior to U.S. automakers seeking bankruptcy protection in 2009, "the volumes were fantastic, but the underlying profitability was a disaster. We're exactly in the same situation, with overcapacity still there," he said.

Hyundai Europe'sregional head, Allan Rushforth, said: "The industry is still faced with record-high incentive levels and artificially inflated sales. It's too early to be celebrating a recovery in the European car market."

Dealer discounts in Germany widened to an average 11.7 percent of the list price last month from 11 percent in January, according to trade publication Autohaus PulsSchlag. Manufacturers offering the steepest price cuts included Renault and PSA, followed by Fiat, Ford and Opel, the magazine's figures show. VW and Audi placed sixth and eighth in discounting.

Positive signs

Erich Hauser, a London-based automotive analyst at International Strategy and Investment Group, said sales were also pushed by people replacing older vehicles. "Demand has been depressed for so long that it can only go up," he said.

Jonathon Poskitt, head of European forecasting for LMC Automotive, said selling rates in western Europe have clawed their way back to mid-2012 levels. "As the year progresses, we would expect the car market continuing to pick up because the economy is starting to move in the right direction," he said.

"People are going to feel more confident to make that big-ticket purchase, such as a car, that they've been holding off on because of the concerns over their employment prospects and their income," Poskitt said.

ISI Group said in a note: "We keep forecasting an ongoing improvement of the underlying sales trend. In addition, we keep highlighting improved vehicle pricing in tandem with better residual values and sales channel mix."

ACEA said February's sales volume were the second lowest for the month since 2003.

Reuters and Bloomberg contributed to this report

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