Auto sales are deteriorating in Europe, with months of meek recovery giving way to deliveries that no longer even measure up to last year’s pandemic-depressed results.
New vehicle registrations fell 18 percent last month and 24 percent in July from a year earlier, the European Automobile Manufacturers’ Association said yesterday.
Sales are up just 13 percent for the year, less than half the percentage increase posted at the year’s halfway point.
Photo: Reuters
SCARCE INVENTORY
Auto production is being suppressed by a global semiconductor shortage that the chief executives of Volkswagen AG, Daimler AG and BMW AG have said would linger well into next year.
If scarce inventory were not enough to drive up prices, automakers are also prioritizing their most lucrative models as the number of vehicles they can produce is constrained.
“The chip shortage is causing production losses, and demand that’s actually high can’t be met,” EY said in a note. “Traditional combustion vehicles have been hit the most, while the boom for plug-in hybrids and electric cars continues.”
The July and August figures are the worst for the two months since the tail end of the eurozone economic crisis in 2013. The declines were broad-based, with Europe’s biggest auto markets — Germany, France, the UK, Italy and Spain — all seeing double-digit drops each month.
So far, automakers have been holding up just fine. First-half earnings, margins and cash flows were the highest in the industry’s history, Bernstein analyst Arndt Ellinghorst said in a report on Wednesday.
“Isn’t autos a funny industry,” he wrote. “The fewer cars OEMs sell, the more money they make.”
Europe’s biggest economies might be having a harder time. Supply crunches are hitting Germany beyond just the automotive sector and threatening to derail its recovery.
Of Europe’s five big markets, Spain performed worst last month, with sales plunging 29 percent, followed by Italy with a 27 percent drop.
LINGERING UNCERTAINTY
Uncertainty related to the COVID-19 pandemic likely added to problems caused by the chip shortage, RBC Capital markets analyst Joe Spak wrote in a report earlier this month.
Among the largest automakers, European sales fell 14 percent for Volkswagen Group, 29 percent for Stellantis NV and 23 percent for Renault SA last month. Registrations dropped 38 percent for Daimler AG and 18 percent for BMW AG.
“While the pandemic is not over in the region, the single biggest challenge facing the industry is now the auto chip shortage,” LMC Automotive analysts wrote in a report last week. “Any meaningful recovery in demand, following the improved economic backdrop in the region, is now being held back.”
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