German auto industry association VDA reportedly cut its sales forecast for 2004 on Tuesday after new car registrations in Europe’s biggest economy fell an adjusted 6% in June to an estimated 310,000 vehicles.

Including two additional working days in June, however, VDA said registrations rose 4% from the year-ago month, according to Reuters.

A spokesman told the news agency VDA had revised lower its guidance for 2004 German new car registrations to a flat 3.24 million units from a previous forecast of a 3% rise to 3.35 million.

“We now expect a stagnant domestic market for this year compared to last, but we haven’t written off 2004 yet however,” VDA President Bernd Gottschalk said in a statement cited by Reuters.

The VDA move reportedly did not come as a surprise, however, as registrations in Germany – which accounts for around a fifth of new car sales in the European Union – have failed to pick up despite solid growth in the wider EU through May.

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“It’s no surprise that they lowered their forecast, since registrations had declined by 2.5% through May and it wasn’t reasonable to conclude that growth in the second half would compensate,” Merck Finck analyst Robert Heberger told Reuters.

Industry research group JD Power-LMC reportedly said June’s figure translated to an annualised rate of below 3.1 million units, underlining the failure of German consumers to react to a broader European economic recovery.

“A market close to, but perhaps now slightly below, last year’s 3.24 million units is now in prospect for 2004,” the group forecast, holding out hope for a mild improvement later in the second half, Reuters said.

With the rest of Europe performing much better, Merck Finck’s Heberger reportedly expected German car makers to be at a relative disadvantage due to their higher exposure to the lagging German market.

Volkswagen will certainly suffer the most as a result of this weakness, due to its comparably higher market share in Germany versus other European peers,” he told Reuters, reaffirming his “sell” rating on VW.

The news agency said the association remained mildly optimistic due to positive leading economic indicators, a raft of both brand new and relaunched models, initial signs of a stabilisation in oil and raw material prices, as well as two more working days in the second half of the year.