European car markets continue to be buoyed by scrappage incentives

Scrapping schemes continue to revitalise the European car market, which managed a fall of just 1.6 percent in 2009 sales, despite a slump sparked by the economic crisis.

Car sales rose strongly in France, Italy and Spain in January thanks to government scrapping incentives, but car makers will soon face the uncertainty of subsidies running out in some key markets.

Italian car sales rose 30.2 percent in January, while Fiat sales were up 30.4 percent, leaving it with a 32 percent market share, according to a Reuter’s calculation.

However new car orders fell 10 percent to around 125,000 vehicles in January, Italian foreign carmakers’ association UNRAE said.

French car sales rose 14 percent in January, car makers’ association the CCFA said on Monday and after being adjusted for the same number of working days, the rise was 19.7 percent. The comparative figure in 2009 was a 7.9 percent drop in sales compared with January 2008.

“The first half (of 2010) could be quite positive. As far as the second half is concerned, there is a big question mark — everything will depend on the recovery in economic activity,” said a spokesman for the CCFA.

Societe Generale analyst Eric-Alain Michelis said the January results in France were “not bad at all.”

The results were still reflecting orders placed in 2009 before the scrappage bonus offered in France was reduced, he said. “If the carmakers’ three-month order books are to be believed, this effect should last for the whole first quarter,” he said.

France’s largest carmaker PSA/Peugeot-Citroen saw January sales rise 17.9 percent, while Renault managed a 59.1 percent boost year-on-year.

Meanwhile, in Spain car sales rose 18.1 percent in January, but are expected to fall in the second half of 2010, as the government subsidies introduced in May evaporate and a VAT tax hike kicks in, Spanish car makers’ association ANFAC said on Monday.

“In the second half of the year sales will be negative, with falls of over 18 percent as a result of the 2 percentage point rise in VAT and an end to government subsidies,” ANFAC said in a statement.

Source: Automotive News