There are signs that the underlying trend for the struggling European car market has now bottomed out, according to the analysts at LMC Automotive.

“The annualised selling rate is picking up a little bit on where it was at the start of the year,” said LMC analyst Jonathon Poskitt. 

Poskitt's assessment follows the publication of the latest EU car sales numbers from ACEA. These show that in June sales declined by 5.6% year-on-year and were 6.6% behind last year's pace in the first six months. The figures confirmed those published earlier in the month by LMC.

“For the rest of the year, we don't expect a great deal of change,” added Poskitt. “Some months will be down on year ago values, but the year as a whole is expected to be 3.5% down on last year, a figure that has just been revised up slightly.”

While many in the industry will welcome an apparent stabilisation of demand in the European car market following a prolonged decline to a depleted level last seen in the early 1990s, the position for Europe's auto industry remains alarming. Vehicle production overcapacity in Europe is estimated at as much as 20% - or 4m units - as demand continues to undershoot the aggregate ability to supply.

Prospects for a sharp recovery to the European car market also appear remote. “Austerity budgets and low economic growth are going to be a feature across the region for a while yet,” notes Poskitt. 

“The eurozone crisis may be out of the headlines and subdued for now, but there's also a realisation that some of the structural issues are far from resolved, with the potential for the crisis to flare up at times. 

“Uncertainties loom large and consumer confidence is generally weak, even though delayed replacement demand should be building. Consumers and businesses are leaning towards caution in their behaviour, as illustrated by the recent weakness in the German car market – despite relatively strong economic fundamentals there.”

BMW has forecast that the European car market will decline by 5% this year and there's a consensus in the industry that 2014 is likely to see a weak recovery, at best.

The ACEA manufacturer data shows that market leading VW Group increased its share of the EU car market in the first half of the year (to 24.8% from 23.9%), helped by stronger sales from SEAT (H1 sales up 10% on last year).

Among the volume groups, PSA Peugeot-Citroen was the biggest first half share loser with EU share down from 12.2% to 11.3% and sales down by over 100,000 units to just over 700,000.

Sign up for a free-to-attend briefing session at this year's Frankfurt IAA