Europe Car Sales Rise 1.1% in Surprise First Gain of the Year

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Automakers eked out a surprise sales increase last month in Europe, the first advance this year for a region still struggling with a patchy recovery reliant on government subsidies.

New-car registrations rose 1.1% in September, the European Automobile Manufacturers Association said Friday. Sales gained in Italy andGermany — two of the major countries offering incentives to support electric-vehicle purchases — and offset still-slumping demand inSpain and France.

Keeping the momentum going in the last few months of the year will be a challenge. Leaders inthe U.K.,Germany,Italy andFrance are struggling to cope with record new Covid-19 cases. Targeted strategies to slow the spread of the disease are being used for now before resorting to the kind of broad national lockdowns that decimated car sales earlier this year.

“We’d argue consumers don’t share automakers’ revival hopes,” Michael Dean, a Bloomberg Intelligence analyst, said in anote ahead of the industry’s sales report. He expects annual deliveries to decline at least 20% and sees risk that the drop will be worse because of coronavirus-related restriction measures.

Europe’s car sales are still down 29% for the year through September. After deliveries cratered in March and April, automakers pared declines the following three months, then suffered a setback in August.

Germany’s car marketexpanded last month for the first time this year, as subsidies for battery-powered vehicles more than quadrupled sales of plug-in hybrid and battery-electric models. But while total registrations rose 8.4% there, Spain saw a 13% drop despite also offering incentives toward EVs.

Western Europe was the worst-performing region this year through August forVolkswagen AG, the top-selling automaker both in the region and globally. Still, with a recovery on solid footingin China, Chief Executive Officer Herbert Diess said VW’s monthly orders and deliveries were up as September came to a close. Hesees the positive trend continuing into the fourth quarter.

“It needs to be seen how much of the currently strong sales momentum is pent-up demand, how much is cyclical and what’s related to ‘the reincarnation of the car,’” Arndt Ellinghorst, Sanford C. Bernstein & Co.’s European auto analyst, wrote in an Oct. 1 report. He predicted recovering deliveries, low inventories and strong pricing will drive “remarkable near-term earnings momentum” forBMW AG andDaimler AG, with VW also benefiting.

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