World’s Auto Sales Run Out Of Gas
Jul 5, 2010 2 Comments ›› Pat Dollard
Global recovery in the car industry seen in the first part of the year is losing steam in markets from the US to China.
In the US, retail car sales have recovered from last year’s lows but slowed over the past two months.
The withdrawal of scrapping incentives introduced last year is hurting sales in Europe, which analysts say will be further affected by austerity plans recently introduced in several countries.
Even in China – the global car industry’s new growth motor – sales growth is slowing month-on-month, with dealers reporting more problems moving cars off lots.
The car market’s softening could spell more trouble for an industry that in 2009 received tens of billions of dollars of emergency bail-out loans and scrappage subsidies.
In Europe, carmakers had predicted the slower market, due largely to the ending of scrappage schemes that artificially inflated car sales last year.
Sales in Germany, which had one of the continent’s biggest such programmes, were 32 per cent lower last month than in June 2009.
They fell by 1.2 per cent in France as the country continued to phase out scrappage.
Carmakers are offering discounts in Germany and other countries to boost sales, but this will probably hurt their profit margins. In Canada, both General Motors and Ford Motor have launched generous “employee pricing†promotions for July and August.
In the US, car sales totalled an annualised 11.1m units in June, higher than 9.7m a year ago, but lower than the 11.2m recorded in April and 11.6m in May.
Brian Johnson, Barclays Capital analyst, estimates that the US retail market shrank to an annualised 8.5m vehicles in June, from more than 9m in each of the previous three months. A slowdown would be a particular blow to GM, which aims to attract investors to a public share offering this year.
While analysts expected emerging market countries to lift overall global industry sales this year, there was still a risk of slowdown in key markets such as China.
Car sales in China grew by 10.9 per cent in June down from their 25 per cent rise in May – the third month-on-month drop. GM said last week that inventory at many of its rivals in China was growing.
“Dealers feel a little bit worried about the second half of the year,†said Yale Zhang, analyst with IHS Automotive.
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