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17 Feb 2021 | 09:20

EU car sales plunge to record January low

(Sharecast News) - EU car registrations plunged to a record low for January as Covid-19 restrictions and economic uncertainty weighed heavily on sales. Passenger car registrations fell 24% to 726,491 as almost all 27 EU markets suffered double-digit reductions, industry body ACEA said.

The result was the biggest fall for January on record and far worse than the 3.3% decline in December. Spain was the hardest-hit, declining 51.5%, followed by Germany where registrations dropped 31.1% and Italy, down 14%.

Registrations rose 22.5% in Sweden and fell 5.8% in France making those markets the only countries not to suffer declines of 10% or more.

Sales of new car were hit by tougher Covid-19 restrictions across the EU as governments sought to combat rising infections and new strains of the virus while rolling out vaccines that could return life to something like normal. Many markets had one business day less than in January 2020, adding to the effect on monthly sales.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said other one off factors such as storm Filomena in Spain and the termination of a VAT cut in Germany affected the result but that the "fundamentals don't look good".

"These are grim numbers, but it would be overly pessimistic to conclude that the slump in January sets the scene for Q1 as a whole, let alone H1," Vistesen said. "That said, the survey data are poor, and fundamentals are mixed, at best. The virus restrictions are one thing, but overall uncertainty over the recovery, labour market prospects and tightening credit standards also all are headwinds for purchases of cars, at least in H1."

Though EU households are likely to spend money stored up during the crisis on durable goods while services are shut but not generally on big items such as cars, Vistesen said.

"The second half of the year should be solid for car sales, as people open their eyes for travel and moving again, but we think H1 will be soft," he added.

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