Last year’s record car sales have not continued into the new year, with sales down across the major European markets. Consumer confidence is crumbling, and isn’t likely to improve in the short term. Carmakers will try to drive sales by offering increased incentives in 2003.

New car sales in Western Europe this January were considerably lower than in the previous year, falling by 7% after a strong performance in December. European carmakers association Acea said western European registrations in January fell to 1,189,538 vehicles. The figures sent auto stocks lower.

While the giddy heights reached in 2002 are a tough act to follow, falls of up to 15% represent a poor start, and have increased fears in the industry that market conditions in 2003 will be tough.

Falling consumer confidence and the general economic slowdown are key factors in explaining the lower figures. Consumer confidence is particularly affected by the prospect of war in the Middle East.

In Germany, where the market is expected to have fallen around 5%, the problems are exacerbated by a 5-year high in unemployment, which stands at 11%.

In France, concerns about pension shortfalls have had a hand in driving orders down by around 10%. The luxury carmakers faired particularly badly, with BMW sales falling by nearly 16%. Domestic manufacturers also performed poorly, with Renault and Peugeot both posting falls of nearly 15%.

In the UK, BMW again had disappointing results, along with rival Mercedes-Benz, with sales falling 17% and 13% respectively. In Italy, where the market fell by 15%, a new scrapping incentive failed to halt the slide.

The downturn is likely to increase competition in the marketplace. In the UK, Saab is offering to pay the congestion charges for London motorists purchasing certain models, at a cost GBP1,300, while certain manufacturers in France are offering rebates. Such initiatives and incentives are likely to become more widespread through 2003 as carmakers and dealers across Europe try desperately to bring people back into the showrooms.

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