Daimler, Porsche show that European car market is at its worst condition

Article by Christian Andrei, on September 24, 2012

Daimler and Porsche have offered evidence that the European car market, which is at its worst condition in 17 years, has had an impact on the luxury brands, amid a more widespread recession that has been felt by southern Europe to Germany. Daimler said that Mercedes-Benz Cars’ operating profit will decrease this year, lowering a previous target that matched the 2011 figure.

Meanwhile, Porsche is planning to produce fewer than the 155,000 cars and SUVs initially targeted for 2013. So far, Mercedes, Porsche, BMW and Audi have not been hurt as much as Fiat, PSA Peugeot Citroen and Renault by the drop in sales. The German automakers had the support of a strong domestic market and the rising exports to China and the U.S.

But now, there are signs that the German market is weakening. Arndt Ellinghorst, a London-based analyst at Credit Suisse Group AG, said that premium brands won’t be immune from pricing trends if this downturn persists longer.

He explained that the biggest problem is Europe’s pricing environment as incentives would spread from Italy, Spain and France to Germany. Last August, European auto sales fell by 8.5% -- the steepest decrease since February, according to ACEA industry association on September 18.

The group has a prediction that deliveries in Europe will reach a 17-year low in 2012. In August, German car registrations decreased by 4.7%, driving the eight-month sales figure to a 0.6% decrease.

Tougher measures are being taken by the volume automakers in the region that suffered the most due to the declining European market. Peugeot recently said that to raise cash, it will sell a majority stake in its trucking unit. An insider said that Fiat's volume brands are terminating 20% of management jobs in Europe.

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