Whatever hope car companies had that economies in Europe might mend in 2013, which would help their fortunes, has disappeared. Sales figures for the region in November tumbled from a year earlier, and some of the strongest nations based on GDP activity posted impressive declines. The firewall that countries like Germany might build for the industry has vanished.
The European Automobile Manufacturers’ Association reported:
In November, demand for new cars was down for the fourteenth consecutive month in the EU, dropping by 10.3% compared with November 2011 which counted on average the same number of working days in the region. In total, 926,486 new cars were registered. From January to November, the EU recorded 11,255,094 new cars, or 7.6% less than in the same period a year ago.
Those numbers tell that the EU market is smaller than the one in the United States.
On a nation-by-nation basis:
New car registrations in November were up 11.3% in the UK, while declining in all other significant markets: -3.5% in Germany, -19.2% in France, -20.1% in Italy and -20.3% in Spain
It is easy to understand the figures for Italy and Spain. It is harder to figure the ones for France and, particularly, Germany. As sales reached a low for the first 11 months not seen since 1993, not one pocket of strength among the largest economies on the continent remains.
Car sales are a relatively good measure of a country’s overall financial fortunes. They tell something about consumer confidence, access to credit and industrial resurgence. In America, car sales have risen 14% over the first 11 months of 2012. While that does not mirror a GDP improvement of 2.5% or so, both numbers are improving.
In Europe, by all measures, Italy and Spain are in recession. France probably is not, and Germany’s economy continues to grow, albeit modestly. Still, cars sales were off by almost a fifth in France during November. That probably shows that French consumers have become extremely cautious about their prospects next year.
In Germany the car sales numbers are even more menacing. The most moderate drop in sales sends a signal that German consumers are troubled.
The car sales news is awfully bad for companies such as General Motors Co. (NYSE: GM) and Ford Motor Co. (NYSE: F), which are losing hundreds of millions of dollars a year in the region. More importantly, as a measure of consumer confidence, the negative news indicates not just future trouble for these companies, but also an undercurrent of the lack of an overall recovery soon.
Douglas A. McIntyre