Car makers nervous as slowdown continues

PSA Peugeot Citroen and Toyota led European car sales 10.3 per cent lower in March, as an unrelenting market contraction spreads to the region’s more prosperous north, unnerving automakers.

Registrations dropped to 1.35 million cars last month from 1.5 million a year earlier, the Association of European Carmakers said yesterday.

That completed a near 10 per cent decline for the first quarter that has prompted industry bosses to trim their 2013 sales outlooks and prepare the ground for possible profit warnings.

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Defying earlier industry predictions of a second-half rebound, European car sales are headed for a sixth straight annual decline to a two-decade low, threatening to undermine the best-laid turnaround plans.

While France’s Peugeot was among March’s biggest casualties, with a further 16.3 per cent sales slump it can ill afford, European No. 1 Volkswagen AG posted a 15 per cent year-on-year decline for its namesake brand as the German market shrank even more sharply.

Domestic sales are “still a critical driver of German (car maker) earnings and the current trend is quite disturbing”, Bernstein analyst Max Warburton said. “The risk is that Europe remains structurally very weak for many years.”

It is a worrying prospect, and not just for Peugeot – which is cutting 8,000 jobs and a domestic plant to stay afloat.

Chief executive Philippe Varin says the outlook has worsened since the company forecast a European market decline this year of between 3 and 5 per cent.

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