New-Car Salesmen Are Lonely in Europe

July 19, 2013

New-Car Salesmen Are Lonely in Europe



IN Europe, new cars are becoming rare items. The European Automobile Manufacturers’ Association reported this week that new-car registrations in the European Union were down 6 percent in June compared with those in the month a year earlier and were running at their slowest pace since 1996. Even in Germany, whose economy has been stronger than those of most of its European brethren, sales were the lowest for any June since the country was unified in 1990.

The lone bright spot was Britain, where June sales were up 13 percent from a year earlier. Retail sales in general have been surprisingly strong in Britain in recent months, and, as can be seen from the accompanying charts, in the last 12 months its new-car registrations were 9 percent higher than in the previous 12 months, making it one of only three European countries shown to have posted an increase.

At the same time, auto sales have been on the rise in the United States and were higher in the last 12 months than at any time since 2008.

New-car sales have long been a reliable economic indicator, one that falls sharply when recessions start and then rises rapidly when economies recover. That is largely because car purchases can often be postponed if buyers are worried, creating pent-up demand when recessions end.

In some of the European countries struggling the most, where an end to the recession appears to be far-off, new-car sales have been falling steadily for years as those who absolutely must buy a car choose a used one instead. In some countries, there is an active business importing used cars from more prosperous nations.

The charts show the level of sales in the last 12 months compared with those for the calendar year 2006, before the credit crisis led to the Great Recession. In a handful of countries, sales are higher now, and in the United States the decline is only 5 percent.

But in the euro zone as a whole, sales are 28 percent below the 2006 level. In Spain, Greece, Portugal and Ireland, sales are down by at least 50 percent, and in most of those countries there is no sign of recovery. Outside the euro zone, sales in Romania and Hungary are also far below the 2006 level.

In the early days of the credit crisis, new-car sales held up better in Europe than in the United States, and more generous “cash for clunkers” incentives ignited a rebound in 2010. But since then, weakening European economies have led to new declines that show no sign of ending.

One of the sharpest declines is in the Netherlands, which has fallen into a new recession amid rising unemployment and falling consumer confidence. June new-car registrations were less than half the level of the previous June, and sales in the last 12 months are down nearly a third compared with those in the period a year earlier.

The charts reflect sales of passenger cars only, excluding sales of light trucks, a category that includes sport utility vehicles and minivans, vehicles that are less likely to be used for business in the United States than in Europe. If those vehicles were included, the performance of both the European and American markets would appear to be a little worse, but the trends would be similar.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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