Europe Car Sales Hit Monthly Low as War Worsens Supply Snarls

(Bloomberg) -- Car sales in the European Union skidded to the lowest on record for February, as manufacturers brace for more disruption to output from supply-chain issues exacerbated by the war in Ukraine.

New-vehicle registrations in the EU fell 6.7% to less than 720,000 for the month, the European Automobile Manufacturers’ Association said Thursday. When including the U.K. and free-trade association countries, sales were down 5.4%. That’s a steeper drop than in January and extends the industry’s streak of declines to eight months.

“European auto demand was already tepid before Russia’s invasion of Ukraine led to production halts and components shortages that will further delay a recovery of European auto sales in 2022,” Bloomberg Intelligence analysts led by Michael Dean said in a note. 

The industry faces a difficult year as lingering shortages of semiconductors, the war in Ukraine and fresh Covid outbreaks in China put further strain on already stretched supply chains. Bloomberg Intelligence expects sales in Europe to at worst remain flat this year, down from its earlier estimate of as little as 5% growth.

While markets including Germany and Spain reported modest growth for February, Italy and France recorded double-digit declines. 

While Russia’s invasion of Ukraine didn’t have a major impact on sales last month, that will change going forward. Ukraine is a key source of wire harnesses that power automotive electrical systems. Plant shutdowns in the country could lower European car production by as many as 700,000 vehicles in the first half, Colin Langan, an analyst at Wells Fargo & Co., said in a report this week.

Volkswagen AG and BMW AG have already idled factories due to the supply disruption, while Mercedes-Benz AG has reduced output at a German factory. VW warned this week it will have to revise its outlook if it’s unable to get wire harnesses for more than three or four weeks.

Stellantis NV and VW were among carmakers that struggled last month, with registrations declining 17% and 12%, respectively. Toyota Motor Co. and BMW grew sales 4.7% and 1.3%, respectively. Hyundai Group was a standout with a 25% gain.

Automakers have tried to weather the supply crises by prioritizing their highest-earning models and raising prices. BMW on Wednesday said operating returns for its automotive business will remain robust this year, even as the war in Ukraine and the chip crisis continue.

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