The German vehicle manufacturers’ trade association, the Verband der Automobilindustrie, (VDA) has revised down its forecast for the German car market this year to 3.2m units, a 7% market decline compared to 2006.

This is the second time this year that the VDA has had to downgrade its forecast. At the beginning of this year the VDA was forecasting the market to be slightly lower than last year’s 3.47m units, or around 3.4m units. This was mainly because the introduction of a new higher rate of value-added tax (VAT) at the beginning of the year brought forward some sales into the end of 2006, artificially boosting sales volumes in November and December.

Then the VDA downgraded its forecast to 3.3m units when it realised that the market was not readjusting in March or April after the effect of the VAT rate increase should have started to wear off.

The latest downgrade comes after new registrations fell a further 7% in June, to 301,000 cars. This means sales in the first six months of the year are down 9% at 1.58m units.

The VDA stressed that German brands are doing better than imports in the weak market. Sales by German brands were down 5% in June, compared with imports, whose sales were down 10%. German brands had a 70% share of the market in the first half of the year.

Last month the German dealers’ association demanded a scrapping incentive of EUR800 per car to boost the market. VDA president, Matthias Wissmann, has said he would be against the idea. According to dpa-AFX news he said the problem with scrapping incentives is that they cannot last forever, and they inevitably distort the market when they end.

Dealers have been amongst the biggest losers in this year’s weak German market. Almost all of the market decline has come from private car sales through dealers, while fleet sales, often negotiated directly with vehicle manufacturers, have held up better.