European car sales decline in May, declining for almost a year


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Record inflation weakens demand and slows global economies cloud sales forecasts, despite gradual improvement in supply chains

Record inflation weakens demand and slows global economies cloud sales forecasts, despite gradual improvement in supply chains

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New car sales in Europe fell for the 11th straight month as record inflation and lower consumer confidence combined with long-term supply chain disruptions.

According to the European Automobile Manufacturers Association, the number of registered vehicles in May decreased by 12.5% ​​to 948,149 units. Volkswagen AG was the hardest hit among the major automakers, with sales down more than 21% year-on-year.

After nearly a year of decline, automakers have recently seen flickering improvements and report that some supply constraints, such as semiconductor shortages, are beginning to ease. Bloomberg Intelligence reports predict that European car sales will recover later this year.

Still, the seriousness of the sales loss in the first half was hit hard. LMC Automotive forecasters have lowered their estimates of annual passenger car sales in Western Europe again this month, the fifth time this year. They are currently expecting 9.8 million deliveries this year, down 7.4% from 2021. In January, LMC predicted a 9% increase in sales.

“Supply chain issues constrain results from this year to 2023,” LMC said in this month’s report.

However, despite gradual improvement in the supply chain, sales forecasts are clouded by record inflation weakening demand and a slowdown in the global economy.

“The situation on the demand side is becoming more and more pessimistic,” LMC said, saying consumer confidence in Europe is lower than it was at the start of the pandemic in early 2020.

To make up for the lost sales, many automakers have raised prices and shifted production to the most expensive models that generate greater profits. However, the strategy can face its limits as consumers suffer more widely from inflation. According to a recent poll by public broadcaster ARD, almost half of all Germans plan to cut spending this year.

Registrations have fallen by about 10% in both Germany and France and by more than 20% in the United Kingdom.

© 2022 Bloomberg LP

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