MILAN – Europe’s auto market is in free fall. Once the motor for Europe’s economy, the car industry has fallen victim to the region’s widening recession and soaring unemployment. Carmakers have suffered 18 straight months of declining sales as people worried that they might soon be out of a job put off making big purchases.
New car sales across Europe slid 10 percent in the first quarter of 2013 to 2.9 million, down from 3.3 million in 2012, the European automakers association ACEA reported from Brussels on Wednesday. Even in Germany, one of Europe’s strongest economies, new car sales plunged 13 percent during the first three months of the year.
Across the rest of Europe, the figures were just as disappointing.
Most major markets saw double-digit contractions: down 11.5 percent in Spain, 13 percent in Italy and 14.6 percent in France.
The German fall — which was felt across the country’s domestic industry from Volkswagen to Mercedes — took analysts by surprise. The country, after all, was still relatively prosperous.
“How can it be so bad when employment and economic growth remain solid?” said Max Warburton of Bernstein Research.
The answer lies in the demand-sapping problems of Europe’s debt crisis.
The economy of the 27-country European Union is on the verge of a recession after it contracted 0.5 percent in the last quarter of 2012 while unemployment is at nearly 11 percent. This has drained consumers across the EU of any confidence to make big-ticket purchases like a new car.
The fortunes of its car industry have a big impact on the rest of Europe because any downturn it suffers is felt across the whole region.
According to the ACEA, the auto industry directly employs 2.3 million — mainly highly skilled — people and supports about another 10 million jobs among the carmakers’ suppliers.
With Europe’s economy forecast only to show some signs of recovery towards the end of this year — and possibly not until into 2014 — any hopes of improving sales for Europe’s car industry appear some way off.