European Car Sales Slump Again, Testing VW's Upbeat Outlook

(Bloomberg) -- European carmakers had another difficult month in October with car registrations slumping once more, putting to the test a fourth-quarter bounce-back forecast by Volkswagen AG and Daimler AG.

  • Deliveries of new passenger cars slid 7.4 percent in the European Union and European Free Trade Association in October from a year earlier, compounding a 23 percent drop during September, according to the European Automobile Manufacturers Association.

Key Insights

  • Some analyst are hopeful. EY consultancy expects things to get back to normal later in the year after emissions testing roiled sales. But Citigroup analyst Angus Tweedie sees downsides for BMW AG and Daimler.
  • Tweedie’s note is titled “The Golden Age Ends With a Crash,” leaving little to interpretation. “Heading into 2019 we see few remaining avenues of maneuver, and with volume growth slowing in most markets believe the scale of pressures will become obvious,” he wrote.
  • Carmaker challenges including a slowdown in China and trade tensions have been enough to rattle the German economy. The threat of U.S. car tariffs on imports from the EU has subsided for now, after Bloomberg News reported Wednesday the U.S. will hold off on a decision.

Market Reaction

  • Shares of European carmakers fell. As of 10 a.m. in Frankfurt, Daimler was down 2.4 percent. VW was off 1.8 percent. BMW dropped 1.5 percent. Aston Martin, which reported results amid a tenuous Brexit deal, fell 5.1 percent, while French carmakers PSA Group and Renault SA were down 1.9 percent and 1 percent, respectively.

Get More

  • Getting cars ready in time for new regulations added to pressure on auto sales. Both Daimler and BMW cited so-called WLTP issues during their respective profit warnings. While BMW made the deadline, it couldn’t escape pricing pressure from rivals flooding the market.
  • The protracted slump followed a jump in August as carmakers rushed to get vehicles out the door before the switchover to new emissions regulations.
  • In the year through October, sales are up 1.4 percent.
European Car Sales Slump Again, Testing VW's Upbeat Outlook