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European car sales slump to 17-year low

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European car sales slump to 17-year low

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Sales of new cars in recession-hit Europe fell to their lowest in 17 years last year.

That leaves the region’ s mass market manufacturers with little room for manoeuvre as they try to cut costly excess production capacity.

At the same time profits are under threat from the aggressive discounting needed to get potential buyers into showrooms.

A 16.3 percent drop in December pulled 2012’s year-on-year sales down by 8.2 percent – a fifth year of contraction.

Industry watchers predict further falls this year and some say changing driving patterns and reduced car use will keep demand weak for years to come.

In contrast to the mass market manufacturers, luxury carmakers had a much better 2012.

The likes of Bentley, Rolls-Royce, Mercedes, BMW, Jaguar and Porsche reported higher sales, and expect that trend to continue this year particularly in the United States.

At a revitalised Detroit Motor Show industry watcher Matthew Stover with Guggenheim Capital Markets said: “Psychologists say your house is who you are and your car is who you want the world to think you are. And I think that when you buy a luxury car you’re making a statement about yourself.”

Luxury brands have not suffered the same tough times as their more common carmaking cousins, and so have been able to reinvest.

They are also speeding ahead in what is now the world’s biggest car market – China.