Government incentives boosted European auto sales to a modest gain in August, but the industry is bracing for a drop in 2010 after the programs end.
Sales of new passenger vehicles in 28 European markets rose 3.0 percent in August, says ACEA, the European auto manufacturers group. That reduces the loss over the first eight months to 8.1 percent, with 9.57 million units sold, compared with 10.41 million for the same period in 2008.
But volume will fall again as major-market government incentive programs end, says analyst Paul Newton of IHS Global Insight in London.
"Before the incentives we enacted, we were looking at an 18 to 20 percent drop in 2009 auto sales," Newton says. "Without incentives, we could have a double-digit decline next year."
Government incentives sharply sep-arate European auto markets.
n Of the seven auto industry-dependent countries offering incentives, five are up in the first eight months. Spain and Italy are down but doing better since initiating plans this spring.
n Every country without incentives is down by double-digit percentages -- except Poland. Poland has no stimulus program, but sales are up 1 percent. In Ireland, Romania, Hungary and four other markets, sales have plunged between 50 and 80 percent.
But government incentives are end-ing. Germany ended its incentive this month when the 5 billion euro ($7.33 billion) budget was used up. The United Kingdom expects to exhaust incentive funds in October or November, "and there is no political will to renew it," Newton says.
"German sales probably won't fall off a cliff because some vehicles ordered under the incentive program won't be delivered for a month or two," he adds. "But by the first quarter of next year, we'll see how big a hangover there is in Europe.