PARIS -- The Western European market weighed heavily on PSA Peugeot Citroen's first-half sales, leaving the carmaker dependent on demand from further afield for its slight overall growth in the period.
Europe's second-biggest carmaker posted a 0.6 percent rise in first-half unit sales on Wednesday but reported a decline of 2.3 percent in Western Europe, despite having launched a series of new models.
PSA's fortunes echoed those of rival Renault which on Tuesday said first-half sales grew 3.6 percent even though sales fell 0.8 percent in its key Western European market.
Despite some signs of a nascent recovery in the region's battered car markets -- France, Germany, Spain and Italy ended the first-half on a positive note -- the first six months saw high raw-material costs, sluggish spending and cut-throat price rivalry continue to trouble France's carmakers.
Both PSA and Renault have given cautious margin targets for 2005, and Peugeot chief Frederic Saint-Geours told reporters on Wednesday the promotional environment in Western Europe remained "very strong". "Keeping the balance between volumes and margins remains very difficult to manage," he said.
NEW MODELS, AGGRESSIVE PROMOTIONS
PSA, however, still expects to achieve moderate sales growth this year, as it continues to renew its range with new models such as the Citroen C1 and Peugeot 107 minis, and uses aggressive promotions.
"Peugeot's H1 unit sales point in the right direction," WestLB analyst Lars Ziehn said in a note. "We believe this to be a slightly positive result as it shows that Q1 2005 should have been a trough for Peugeot."
The company sold 1.754 million units in the first half versus 1.743 million a year earlier. Sales of its Peugeot brand rose 0.6 percent to 1.028 million units, while Citroen sales increased 0.5 percent to 726,000.
"We confirm our full-year targets and our outlook for the markets," Saint-Geours said, adding he was confident Peugeot would regain some market share in western Europe and continue its expansion outside the region.
PSA stock is up from around 45 euros in late April, when the company confirmed its full-year operating margin target of 4 percent to 4.5 percent.
Outside Western Europe, PSA's sales rose 9 percent, and represented more than 29 percent of the group's total sales.
The company said sales in China were back on track after a slowdown last year, with the figure up 59.6 percent over the period. Sales in China should continue to grow as the company widens its product line-up, it said.