European car market endures longest slump ever

MILAN (AP) — The European car market has endured its longest slump ever with a sixth straight year of contraction in 2013, but an unexpected surge in December sales may signal recovery, according to industry data released Thursday.

EU car sales shrank 1.7 percent last year to 11.8 million, the lowest level since 1995 and a 26 percent contraction from 2007, before the crisis bottomed out the European market, according to the European carmaker's association.

The slide, however, was not as large as automakers had feared at the beginning of last year, when predictions ranged from further market losses of 3 percent to 5 percent.

That was largely thanks to an improvement at the end of the year. A 13.3 percent gain in December extended a market upswing to four months.

"I think the improvement in the fourth quarter was not anticipated by most," Sascha Gommel, an auto analyst at Commerzbank in Frankfurt. "I am also surprised by the magnitude."

Gommel and others said they believe the market is in recovery, after hitting bottom in mid-2013. The end to recession in the European Union, an aging European fleet supporting replacement demand, incentives in some countries and lower financing costs are all feeding the upswing. Gommel said that while European pricing is the weakest in the world, price didn't seem to be a major factor in market improvements.

Commerzbank forecast that the European market will grow by 3 percent this year, the first improvement since 2007.

Analysts cautioned, however, to not read too much into the four-month uptick in sales. The gain in December, for example, was flattered by the fact that the month included an additional working day compared with a year earlier and the previous year's figures were very weak.

Carlos Da Silva of IHS Automotive said it would be a misunderstanding "to consider that, from now on, after four months of continuous growth, the EU market is out of the woods and back on track as if nothing had happened."

The fourth-quarter uptick also was fed by incentives and car manufacturers' making tactical sales through self-registrations and other maneuvers to hit targets, he said.

IHS does not expect the market ever to return to the 2007 peak of 16 million, and that it will take a decade to reach 2008 volumes of 14.7 million.

The recovery is also likely to be slow, particularly in the first quarter, concurred Allan Rushforth, the chief operating officer for Hyundai Motor Europe.

The Korean automaker posted an 8 percent drop in December sales, and a 2.2 percent decline for the year for a 3.4 percent market share. Renault sales rose 30 percent, Ford sales were up 21 percent and Volkswagen sales improved by 22 percent.

Gains were broad-based during the month. Even Italy, Europe's fourth-largest car market where sales have been at 30-year lows, saw new car purchases rise modestly. Incentives in Spain and the Netherlands helped push up sales for the month by 18 and 115 percent, respectively.

The picture for the full year was more mixed. Britain posted a double-digit increase, while Spain had small gains. Sales slumped in Germany, France and Italy.