New-car prices in Europe are tumbling as automakers are forced to offer big discounts to counter a sales slump caused by economic misery and the end of scrapping incentives.
The price war is affecting automaker profits, pushing their European operations into the red.
Net car prices – which include discounts and incentives – fell 3 percent in the first eight months of the year, compared with an average annual decline of about a 1 percent in recent years, Jean-Marc Gales, director of brands at PSA/Peugeot-Citroen SA, told Automotive News Europe.
Stuart Pearson, an auto analyst at Morgan Stanley in London, said: “We expect net pricing excluding discounting to decrease between 0.5 and 1.0 percent for the year as whole, but with a higher pressure in the second half.”
Automakers complain about aggressive discounting, but none admit to doing it. Instead they blame other car companies.
Ford Motor Co. Chief Financial Officer Lewis Booth said on an Oct. 26 analysts call that in Europe "some of our competitors are doing very unbusinesslike things at the end of each month." As examples he mentioned flooding dealer lots with unwanted new cars that are self-registered and later sold off at used-car prices.
Fiat CEO Sergio Marchionne said some of his company's rival in western Europe "have taken a much more aggressive view of pricing" to offset slow demand for new cars and to keep their factories busy.
“We have resisted taking part in what we consider to be value-destroying initiatives in terms of pricing, which is a lot more frequent in Europe than it is anywhere else,” Marchionne said Oct. 21 on a telephone call with financial analysts.
Renault's sales chief, Jerome Stoll, said his company is ready to cut prices to keep business.
"The European contest is getting more aggressive and we are defending our market shares,” Stoll said Oct. 28 on a call with analysts. "We're following competitors and doing just enough not to lose market share,” he said. “Conquering a new customer costs more than retaining one.”