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Wednesday, June 19, 2013 12:38 PM

European Car Sales Hit 20-Year Low; Don't Worry, Things Have Stabilized

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NPR reports European Car Sales Hit 20-Year Low For May.

Country by Country Details

  • Passenger car sales dropped by 5.9% from May 2012 in the 27-country European Union to 1.042 million units, the lowest level since May 1993
  • German car sales dropped 9.9% in May, Italy was down 8%, France down 10.4%, Spain down 2.6%
  • PSA Peugeot-Citroen, Renault, Ford, General Motors and Fiat all suffered double-digit declines in May
  • Volkswagen had a 2.8% drop in brand sales and 5.9 percent decline for the group. Sales of Mercedes brand were up 2.8% percent and BMW brand sales declined 8.1%.
  • Jaguar/Land Rover and Japan's Mazda resisted the crisis with a 9.8 percent and 30 percent increase in sales, respectively, but on much smaller volumes and a market share of just 1 percent. Korean automaker Hyundai saw sales rise 1.9 percent.

First Quarter GDP

  • GDP in the 17 country eurozone shrank by 0.2 percent in the first quarter of this year, the sixth such decline in a row
  • The wider 27-country EU has also seen its economy slide into recession, shrinking 0.1 percent in the first three months of 2013

Italy VAT Hike

"The head of Italy's association of foreign carmakers, Romano Valente, urged the government to resist raising the value-added tax on car sales. The tax is scheduled to increase to 22 percent from 21 percent in July. Officials have said it will raise 4 billion euros ($5.33 billion), but conservative lawmakers in the cross-party coalition are opposed, claiming it will hit sales of big-ticket items harder."

For Italy economic comments, please see Dumb and Dumber Tax Hikes in Italy; Grand Coalition Splintering; Another Italy Convulsion Coming Up

Signs of Stabilization?

My favorite comment comes from IHS Automotive analyst Carlos da Silva who sees the situation in Europe as stabilizing: "The situation remains tense. Yet, for the second month in a row the rate of decline is slowing down. This means that sales are stabilizing trend-wise."

Stabilizing? Really? With German sales plunging? And a VAT hike in Italy? With Spain in a Depression? With France imploding under Hollande?

I suggest the slide in Germany and France is going to catch nearly every economist off guard with its intensity. A VAT hike in Italy will be icing on the depression cake.

At least one can make a claim about pent-up demand in Europe. One cannot say the same thing in the US.

Mike "Mish" Shedlock

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