Thursday, June 20, 2013

European Car Sales in May

The passenger car sales in Europe, which seemed to improve in April (mostly due to the early easter), have "reached" (down 5.9 % yoy) the "lowest level recorded for a month of May since 1993", according to ACEA. Every major market in Europe was down compared to last year, except for Great Britain, were car sales increased by 11 %. Not that this will help the country, since they do not have an actual car industry (safe for German owned brands which are for the most part also designed in Germany) of their own anymore thanks to it being structurally reformed away by neo-liberal geniuses.

So why was Germany hit so hard? Private car registrations for Golf/Jetta, the best selling car in Germany, increased by 33 % compared to last year. So consumers are willing to to make large investments, again. Companies aren't though, here Golf/Jetta registrations fell by over 23 %, overall 20 881  (down 5.8 % yoy) were registered in Germany in May, 11,777 commercial and 9,104 private.  Of the eight "best-selling" cars bought by companies only two did not see double digit losses; four had decreases of over 20 %. Opel/Vauxhall Astra is in sixth place with over a third less sales than last year. Only the BMW 1 series, which came in ninth place, was registered 21 % more often, and the tenth placed Audi A3 saw a tiny 0.2 % increase.

Still some might claim that the awful numbers were due to the "Abwrackprämie", a scheme to help the suffering automotive industry in 2009. The federal government paid € 2,500 to every person that brought his old car to the junkyard and bought a new one. A program similar to other programs in Europe. Of course as one can see above this is not the case, since demand of companies and not consumers is lacking.

What can be done about this situation? First we must be clear that this is a structural problem, also it is only a symptom of the euro crisis. The demand has been falling everywhere in Europe for such a long time now that schemes to prop up short terms sales will not be a solution. In 2009 such programs did make sense to help suppliers survive, but today unlike back then it is not a worldwide short term phenomenon. Car manufactuerers that are based in Europe but operate globally have not been hit that hard. BMW Group, for example, sold more cars in May than ever before. The companies that are affected the most are therefore PSA, Opel/Vauxhall, and Renault. The last is in better shape since they foresaw the trend to cheaper cars and their brand Dacia is doing fine. Opel is in my opinion utterly redundant. The GM brand almost did not survive the initial crisis and is still losing money for its parent corporation. My short term solution is that Opel needs to disappear. . Since European politicians are absolutely unwilling to do necessary steps to solve the crisis, reducing supply is the only thing that can be done right now. Germany should take the hit. Killing Opel is by no means an optimal solution. It is in fact no solution whatsoever, but it is the only way to avoid worsening of the crisis in France. 

The only real solution would be to end the mess in the eurozone, but our "leadership" is incapable of even doing the first real steps for us to return to growth and are still in a state of denial about the complete failure of their policies since 2008. But hey, after tons of "stress tests - that didn't. and new programs to reduce youth unemployment - that won't, we will now get a banking union - that isn't. Guess it is time to accept the new normal of being behind the curve at all times, so the new normal will be "structurally reforming" supply.

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