A collapse in retail demand means new car sales in Germany will fall 100,000 vehicles short of expectations, industry group VDA said, cutting its 2007 forecast for a second time after six months of heavy declines.
"After intensive examination of all influencing factors, we've decided to adjust our forecast for the domestic car market in 2007 in view of the newest figures," VDA President Matthias Wissmann said on Tuesday, citing a 7 percent drop in June.
The industry now expects roughly 3.2 million new cars to be registered this year in Europe's biggest market, which would rank 2007 among the worst years. The VDA had in March dropped the forecast to 3.3 million from 3.4 million initially.
Wissmann blamed a combination of factors, including a 3 percentage point hike in value-added tax - the biggest tax increase in post-war Germany - as well as uncertainty over discussions on how to tax a vehicle's carbon emissions. "The CO2 output of a car, until a year ago almost an unknown amount, was suddenly more prominent than its horsepower," the VDA president said in his annual report.
New cars registered to retail buyers in the first five months of this year have dropped by 27 percent, and cars owned privately now have reached an average age of 8.7 years. Six-month data for this was not immediately available.
The VDA called on the federal government to encourage demand by applying to existing cars on the road the planned change in vehicle tax, which is no longer based on engine displacement but on CO2 emissions. "If all the average age of German cars on the road were to drop by one year, then 800 million litres of fuel could be saved, or 2 million tonnes of CO2," the VDA said in its report.
According to VDA's preliminary data, new car registrations in Germany fell 7 percent in June to 301,000 vehicles, bringing the figure for the first half of this year to 1.58 million or a decrease of 9 percent.
Should the current rate of decline in registrations persist, only 3.15 million new cars would be registered, which would make 2007 the market's worst year since German reunification in 1990. Sales in other major European markets so far have all fared better, by comparison.
French new car registrations fell only 3.2 percent following strong declines in sales of Renault and Peugeot cars, while Spain slid 1.8 percent. Italy recorded an 8 percent surge in June helped by buoyant demand for Fiats. In a note of optimism, VDA said the German car makers registered the first stabilisation for domestic new car orders since October last year that may signal better times ahead.
"That could be a silver lining on the horizon. There certainly is a chance that the bottom has been reached and the factors that have hindered demand in the first half of the year are slowly dissipating," Wissmann said. "That gives us a perspective for registrations in the year 2008."
While many German carmakers like Volkswagen, BMW and DaimlerChrysler depend to a great degree on their domestic markets for a chunk of their sales, booming demand from abroad means export and production will reach new record highs in 2007.
"We will build 5.6 million cars this year in Germany alone, of which 4.2 million will be exported," Wissmann said. Every seventh job in Germany depends on the automobile industry, according to the VDA.
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