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WRAPUP 1-Drop in European car sales slowed in May

Published 06/16/2009, 09:16 AM
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* Total European new car registrations down 4.9 pct -ACEA

* W.European (EU15 + EFTA) figures show 3.2 pct drop -ACEA

* Low-cost Dacia brand doubles May market share -ACEA

* GM gets deal to sell Saab to Swedish carmaker Koenigsegg

By Christiaan Hetzner

FRANKFURT, June 16 (Reuters) - The decline in European car sales slowed last month, although industry commentators said it was still uncertain as to whether the worst was over for the industry since the vicious sales slump began over a year ago.

Industry data published on Tuesday showed new car registrations falling just 4.9 percent to 1.27 million in May, despite there being one fewer working day than a year ago.

But while the decline was less severe a spokeswoman for the ACEA industry association that collected the figures cautioned that many car companies would have struggled to sell without the benefit of gopvernments offering cash incentives to consumers to scrap old cars in favour of new ones.

"It is very difficult to say where the market is at this stage and it's probably too early to even say that it is too early to say it has bottomed out," said ACEA's Sigrid de Vries.

She added that May was the first month that benefitted from a weak year-on-year comparison, since the slump first began in May 2008 with a 7.8 percent decline in the European market.

And the detail showed an even more variable picture with sales at Saab and Chrysler suffering declines of over 60 percent in May when both companies were operating under insolvency protection schemes.

However, Saab's owner GM announced on Tuesday that it had reached a preliminary deal to sell Saab to Swedish sportscar maker Koenigsegg.

On Monday the head of Robert Bosch's U.S. car parts business told Reuters Television that the worst might also be over for the world's largest car market, which similarly plans a cash for old cars programme.

"I think on the automotive side that we see the bottom now and that we could expect that for the remainder of this year that we see some slight improvement, but not a very significant jump," Peter Marks said.

But his boss, Bernd Bohr, who runs the Bosch group's automotive division, remained gloomy for the business, forecasting a 15-20 percent drop in global car output this year that would directly be reflected in his top line.

"Despite the cash for clunkers incentive in Germany and some other countries, our turnover with auto components will fall more by 20 percent than by 15 percent," Bohr said.

Meanwhile French newspapers reported that tyre giant Michelin would announce next week it will cut up to 1,500 jobs in France.

Frankfurt's VDA, the German automotive industry association, said the overall Western European market would have declined by 22 percent were one to strip out results from Germany and France where scrapping schemes have boosted new registrations.

"The global demand crisis in the auto industry is not over, but there are initial indications that the downturn is decelerating," it said in a statement.

Sales in Germany last month jumped by 40 percent on a year ago to 384,578 vehicles thanks to its incentive scheme. But the rise was distorted by a time lag in the registration of a lot of cars which were actually sold in March under the scheme.

"First of all May 2008 was our worst on record and this May was the best, but a large part of the swing also came from this peak in demand at the end of March," a VDA spokesman said.

The scheme has been such a hit in Germany, where the average age of the country's fleet at over eight years qualified virtually every car, that there is only enough money left to accept applications for another 400,000 vehicles.

Germany's idea has prompted other countries to introduce similar programmes and schemes in the major markets of Spain and the UK only began last month.

ACEA's De Vries cautioned however against expecting similar results there as in Germany, and not only because Germany offered the most money.

"The success depends on the amount of money certainly but also on the complexity of the scheme and it's clear that they won't have the same effect in all countries," she said.

PREMIUM IN PAIN

European car sales in May also showed a preference for cheaper, more basic models, with drivers less attracted to luxury brands like Daimler's Mercedes-Benz.

The biggest increase in sales was enjoyed by Renault's Romanian subsidiary Dacia's no-frills Logan saloon and Sandero hatchback where buyers could extract the most savings.

The low-cost Romanian producer saw its new car registrations double in May despite Dacia's own domestic market shrinking by half, giving the brand a 2 percent share in Europe last month -- equivalent to that of Japan's Nissan.

Alone in the higher margin Western European market, Dacia more than tripled its sales to nearly 20,000 vehicles.

Meanwhile luxury and semi-premium brands experienced another disastrous month by comparison.

Mercedes and VW's Audi both fell by about 9 percent, while BMW's eponymous flagship brand saw a 15 percent decrease and Volvo dropped 20 percent.

New car registrations at Toyota's Lexus plummeted by half and continued to lose what little foothold it had in Europe despite being a major luxury player in the United States.

To see ACEA's full announcement, please click on: http://www.acea.be/images/uploads/files/20090616_PRPC-FINAL-0905.pdf

To read a list of the scrapping programmes in Europe http://www.acea.be/images/uploads/files/20090529_Scrapping_schemes.pdf (Editing by Greg Mahlich)

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