Car sales in Europe return to growth after a painful year of decline

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Europe’s new car market returned to growth in August for the first gain in 13 months, although the respite may be short-lived as record inflation and an unprecedented energy crisis threaten to discourage buyers.

Registrations rose 3.4% to 748,961 vehicles last month, the Association of European Automobile Manufacturers announced on Friday. Germany’s Mercedes-Benz AG was among the top performers with a 16% jump from a year ago.

Automakers are seeing glimmers of improvement with some supply chain constraints such as lack of semiconductors starting to ease. Despite everything, galloping inflation and the slowdown in the global economy are clouding sales forecasts. Last month’s performance compares to the poor performance of the previous year and remains well below pre-pandemic levels.

“High inflation, rising interest rates and declining consumer confidence, coupled with longer customer replacement cycles amid improved reliability of newer cars and the rapidly changing technology, could challenge underlying demand in 2023 and beyond,” Bloomberg Intelligence’s Gillian Davis said in a note this week. .

Forecasting vehicle purchases remains difficult as consumers worry about rising energy bills and the risk of blackouts as Russia cuts gas deliveries. Authorities in Germany, Europe’s biggest car market, this week urged industrial consumers to reduce their gas consumption. One of the largest polymer suppliers to the German automotive industry is cutting production in Europe due to excessive energy costs.

The cost of energy and rising interest rates that are squeezing car buyers are expected to cap high vehicle prices that rose when shortages of semiconductors reduced car availability. European Central Bank officials said they expect to raise borrowing costs further at their upcoming meetings after last week’s rate hike.

Registrations increased by 3% in Germany, 3.8% in France and 9.1% in Spain.

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