European car sales losing streak hits

three months

Car sales in the European Union, led by a big drop in Germany, fell for the third straight month as buyers lost interest in making the big purchase without the lure of government scrappage incentive programs.

New-car registrations in the EU for June dropped 6.9% to 1.34 million vehicles from the same month a year ago, according to a report from the European Automobile Manufacturers' Association on Thursday.

Last year, customers took advantage of government-backed promotions to turn in their older, less fuel-efficient cars for discounts on newer, more gas-friendly models. But these deals are either gone or on their way out and demand is drying up.

Germany was the hardest hit, off by 32%, though Citigroup analyst John Lawson was mostly upbeat about the prospects for the high-end auto makers in region.

"Europe's auto industry should be a profitable lot in [the first half of the year], none more so than the upscale Germans where a combination of positives appears to have emboldened management to think far more positively about 2010 than initially planned," he said in a note to clients.

Lawson picked BMW as his favorite, pointing to continuing product cycle benefits and variable cost reduction through 2011 and 2012. He maintained his hold rating on Daimler, arguing half a recovery in trucks is priced in.

He wasn't as sanguine about the prospects for Volkswagen as he downgraded the company's preference shares  to hold from buy, saying it's hard to find the next driver if there are slightly declining European car markets in 2011.

Group registrations at Volkswagen, Europe's biggest carmaker by sales volume, fell 8.9% while BMW tacked on 6.7%. Daimler sales retreated 6.9%.

Elsewhere, Italy and France fared better than their German counterparts, but were still down 19% and 1.3%, respectively. On a positive note, the United Kingdom saw registrations climb 11% while Spain came in with a 26% jump.

Renault SA sales edged up 3.4%.

Ford Motor Co.  reported a 16% decline in the region and General Motors, heading toward its big IPO in the U.S., saw EU sales dip 0.3%.

For the first half of the year, total EU vehicles sales eked out a minimal 0.2% gain from a year earlier to 7.29 million cars and trucks. Germany sales fell almost 29% during that time frame as the only major market to post a retreat.