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European car sales wax or wane with government support

Source: Reuters - Thu 3rd Jun 2010

European car markets in May showed the impact of government support, for good or ill, as French car sales fell for the first time in over a year, while Spanish car sales surged by almost 45 percent.

Passenger car sales have been buoyed by scrapping incentive schemes in major European markets, but some of these have run out or are expiring soon, leading to forecasts of a tough second half of 2010 from many carmakers.

In France, where the scheme is still in place but at a lower level than the 1,000 euros (834 pounds) previously offered, new passenger car sales fell 11.5 percent year-on-year in May to 186,337 registrations, carmakers' association CCFA said on Tuesday.

The last fall in the French car market was in April 2009, as the government scheme introduced early last year supported the falling market.

Until the end of June, French car buyers can get 700 euros for trading in an old car for a newer model, falling to 500 euros from July 1.

French light commercial vehicle sales, which had been showing signs of recovery, underlining the economic upturn, edged 2.8 percent lower year-on-year in May.

In the first five months of the year, passenger car sales were up 7.2 percent in France, while light commercial vehicle sales were up 10 percent over the same period.

Renault group sales rose 13.8 percent year-on-year in May, with Renault brand sales edging 1.7 percent lower and Dacia sales increasing more than 100 percent to 10,258 vehicles.

"On the Renault brand we can see the full 'Scenic effect' - it is a strong lever" said Societe Generale analyst Philippe Barrier, explaining why Renault sales dipped less than the market.

PSA Peugeot Citroen sales fell 13.1 percent, with a 13.9 percent decline in Citroen brand sales and a 12.3 percent drop for Peugeot.

"The impact of support is running out ... and it is small, entry-level vehicles which are feeling it most" a CCFA spokesman said.

"We expected this drop compared with the very high levels of last year. Now we're falling back to average levels the market saw before scrapping incentives" he said, adding that June sales figures would be very closely scrutinised.

In Spain, where government subsidies of up to 2,000 euros for new car purchases are set to last until the end of June, new car sales rose 44.6 percent to 102,873 units in May, carmakers' association ANFAC said.

U.S. car sales data for May is due out on Wednesday, with Toyota's performance of particular interest as investors seek clues on whether the impact of incentives the Japanese automaker introduced to combat a safety and recall crisis is waning.

Ford sales analyst George Pipas told reporters on Friday that the automaker expected "notable" gains in May sales.

Industrywide, May sales are expected to come in slightly above the average selling rate of 11 million units from January through April, Pipas said.

Car sales data released earlier on Tuesday in Asia showed strong growth in May, highlighting the importance of global carmakers' strategy to focus their attention on that region's fast-growing economies.

In Japan, overall vehicle sales including 660cc mini-vehicles rose 22 percent year-on-year.

India's Bajaj Auto saw a 62 percent increase in May vehicle sales.

Hyundai Motor Co Ltd said sales rose 19 percent in May, but the South Korean automaker's shares fell as domestic sales were down a steeper-than-expected 23 percent on a year ago.

Hyundai, one of the top global performers during the financial crisis and sales slump that followed, was the sole Korean automaker with falling local sales for two months.

It faced new model launches by affiliate Kia Motors Corp and aggressive marketing of imports by rivals such as Toyota Motor Co.

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