The Korea Herald

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Porsche, Daimler indicate Europe’s car crisis spreading

By Kim Yon-se

Published : Sept. 23, 2012 - 20:01

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Daimler AG and Porsche AG provided evidence that the worst European car market in 17 years has started to spread to the luxury brands, mirroring a broader recession that has spilled from southern Europe to Germany.

Stuttgart, Germany-based Daimler said yesterday that operating profit at Mercedes-Benz Cars will fall this year, lowering a previous target of matching the 2011 figure, while Porsche plans to build fewer than the 155,000 cars and sport- utility vehicles originally planned for next year.

Daimler, Porsche, Bayerische Motoren Werke AG and Volkswagen AG’s Audi brand have so far proved resilient to the plunge in sales that has plagued Fiat SpA, PSA Peugeot Citroen and Renault SA. The German automakers have been sustained by a robust domestic market and booming exports to China and the U.S. The German market is now also showing signs of weakening. 
The Porsche 911 turbo The Porsche 911 turbo

“If a downturn lasts for longer, which this one is, premium is not immune from pricing trends,” said Arndt Ellinghorst, a London-based analyst at Credit Suisse Group AG with an outperform recommendation on BMW, Porsche and VW, and a neutral on Daimler. “The pricing environment in Europe is the biggest problem,” with incentives spreading from Italy, Spain and France to Germany.

European car sales dropped 8.5 percent in August, the steepest decline since February, the Brussels-based ACEA industry association said on Sept. 18. The group forecasts that European deliveries will hit a 17-year low in 2012. German car registrations fell 4.7 percent in August, pushing the eight- month sales figure to a 0.6 percent decline.

The region’s volume carmakers, hit hardest by the European market’s downward spiral, are taking even tougher measures. Peugeot agreed yesterday to sell a majority stake in its trucking unit to raise cash. Fiat’s volume brands are eliminating 20 percent of management jobs in Europe, according to a person familiar with the matter.

Dealers in Germany, Europe’s biggest economy, offered discounts on average of 12.1 percent off the sticker price last month, the highest rate in more than a year, according to industry publication Autohaus PulsSchlag. Price cuts by Daimler’s Mercedes-Benz brand in August jumped to 11.7 percent from 9.2 percent a year earlier. Incentives at Audi widened to 9.7 percent from 9.2 percent.

The increased incentives helped Audi and Mercedes, the world’s second- and third-biggest luxury-car producers, post sales gains last month in Europe, according to ACEA figures. Registrations at top-ranked BMW fell in the region.

Daimler shares rose 0.8 percent to 39.53 euros as of 1:42 p.m. in Frankfurt, and VW gained 1.1 percent to 151.60 euros. BMW fell 0.2 percent to 59.31 euros. BMW, Daimler and Porsche shares are among the worst performers on the Stoxx 600 Automobiles & Parts Index this year, gaining as much as 16 percent versus a 24 percent increase in the index. 

(Bloomberg)