European car sales rise 4%, boosted by incentives

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European car sales rose 4 percent in June as an economic recovery in southern Europe, new product launches and retail incentives boosted demand for mass-market brands.

Registrations in the EU and EFTA markets increased to 1.23 million vehicles from 1.18 million a year earlier, ACEA, said today in a statement. That marked 10 consecutive months of growth, matching an expansion from June 2009 through March 2010.

In the first six months, sales across the region rose 6 percent to 6.85 million vehicles, ACEA said.

The June rise comes from a low base and was spread unevenly across the region. Analysts also said that heavy discounting and other incentives were distorting the true level of demand. Retail incentives across Europe's top five markets increased 10 percent year on year to a record 2,748 euros ($3,700) per vehicle, according to data from a major independent market research firm.

Peter Fuss, an Ernst & Young senior advisory partner, said: "Heavy discounting and other incentives for buyers remain a significant area of concern, as they continue to distort the true level of demand."

Hyundai's European operations head, Allan Rushforth, said: "After a six-year slump in the European car market, an inconsistent and heavily incentivized recovery is better than no recovery at all." The dilemma for carmakers now is how they pursue future sales amid pricing pressure, he said.

Skoda, Seat gains

Volkswagen sold 2.5 percent more cars in the region. Gains of 13 percent at both Seat and Skoda and a 1 percent increase at the premium Audi brand offset a 3 percent drop at the namesake VW marque. Seat is widening its Leon compact lineup while Skoda has renewed its Octavia top seller.

PSA/Peugeot-Citroen's registrations fell 0.2 percent as a 3 percent rise in Peugeot brand's volume failed to counter a 4 percent drop at Citroen.

Group sales by Renault rose 24 percent in June, including a 21 percent jump at the namesake brand and 32 percent increase at Dacia, helped by a revamped Duster SUV and Sandero hatchback. 

Combined European sales by General Motors Co.’s twin Opel and Vauxhall marques rose 12 percent, as the Mokka compact SUV and Corsa small car won buyers.

Ford sold 0.9 percent fewer cars last month year on year.

Fiat Group sales were up 7 percent led by a 5.5 percent gain at the automaker's core Fiat brand.

BMW, Mercedes

BMW sold 4.5 percent more autos in Europe groupwide last month as the namesake brand’s 7.6 percent gain more than made up for a 7 percent drop in the Mini nameplate. Sales of the 2-series coupe, available since March, and the 5-series sedan helped boost the BMW nameplate’s deliveries. The Mini lineup is being updated.

Daimler's deliveries fell 1 percent with Mercedes brand posting a 1 percent increase and Smart a 20 percent decline.

Asian brands except Hyundai saw sales increases with Toyota's sales including Lexus rising 5.5 percent. Nissan's volume was up 10 percent and Kia's 3 percent while Hyundai registrations fell 5 percent. Honda sales were down 11 percent.

Discounts to decline

Ernst & Young's Fuss said he expects the car sales growth momentum to continue for the rest of the year.

"As we move into the second half, consumers are likely to replace aging vehicles, driven by a recovery in western Europe's labor market and positive consumer sentiment due to an improving economic scenario," he said. "We anticipate discounts and self-registrations to decline gradually as economic fundamentals improve and the replacement cycle returns to normal."

June registrations underperformed the regional trend in France and Italy rising 2.5 percent and 4 percent respectively, while falling nearly 2 percent in Germany, where sales were held back by fewer working days than a year ago.

However, they grew in double digits in some states most hit by the financial crisis - increasing by 24 percent in Spain and 24 percent in Portugal - showing that the region's fragile recovery is gaining momentum. Sales in Greece surged 41 percent.

The UK continued to show strong growth with registrations up 6 percent.

Bloomberg and Reuters contributed to this report

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