Luxury brands grow in Europe, while others fall

The discrepancy between the European luxury car makers and those aimed at the mass market, in difficulty by relying on the weakened economy, Europe seems bound to grow.
The Italian Fiat SpA warned yesterday that the European automotive market may shrink more than expected this year, as rising unemployment, tax increases and economic uncertainties in much of Europe continue to weaken the demand for new cars.
On the other hand, the sustained growth of sales in North America, China and other markets such as Brazil and Russia continues generating requests for European automakers to luxury cars. The German BMW AG and Audi AG had record sales last month due to strong demand, especially from customers of the United States and China.
The problems in Europe underscore the need to tackle the chronic problem of overcapacity in the industry, although the proposed factory closures at General Motors co., PSA Peugeot Citroën and Ford Motor Co. so far remain isolated in the face of political opposition and trade unions to maintain jobs. The demand for new cars in Western Europe fell 10% in March compared with the same period in 2012, compared with a fall of 8.2% for the whole last year, according to the British consultancy LMC Automotive.
"The auto industry is becoming a society of two classes," said Peter Fuss, a partner at GSA Ernst & Young. "While some companies are achieving record profit, other are dragging."
The world's biggest carmaker, BMW luxury cars, registered another record in March, selling 191,269 vehicles of the brands BMW, Mini and Rolls-Royce, a high of 3% as compared to the same period in 2012. Already sales of Audi, a division of Volkswagen AG and BMW's main competitor, also rose 3% in March to a record 147,700 units.
BMW and Audi are investing heavily in increased production capacity and new models. Examples are the BMW 3 series and the new Audi A3 hatchback, which are selling well in the United States and China, the biggest car markets in the world.
But the prospects for this year are still bad and mass may worsen even more. The Chief Executive of Fiat, Sergio Marchionne, warned shareholders in the company's annual meeting that the European car market might get worse before improving, which would lead Fiat review their financial estimates.
"As for Europe, taking into account the trends in demand for cars and light commercial vehicles in the first quarter, 2013 can close in fall again, although moderate, marking the sixth consecutive year of contraction," said Marchionne. A more severe decline in European demand "would be a result worse than the predictions we made in January on the basis of our targets for 2013," he said.
Fiat still expects to disclose this year net profit of € 1.5 billion ($ 2 billion) and reach the break-even point in Europe between 2015 and 2016, according to the Executive.
The Italian car market, Fiat's largest in Europe, contracted less in March after having brought abrupt falls for many months. The contraction was 4.9% compared to the previous year, compared with 17% in February. The new car registrations, an indicator of sales, were still in decline of 17% in the first quarter.
BMW sales director Ian Robertson, said the company had strong performance "despite headwinds in Europe". BMW's sales in Germany fell by 3.8% in the first quarter, as compared to the same period in 2012. But considering the whole of Europe, including Russia, where demand was strong, sales increased 3.1%. Sales rose 4.3% in the USA, 7.6% in China, 7.2% in Japan and 17% in Korea.
Audi reported that their sales in Western Europe rose by 0.7% in the first quarter, although they have fallen 1.7 percent in Germany. Sales rose 14 percent in China, which became the most important market for the brand Volkswagen and Audi. Fiat, Peugeot and Renault SA have not yet released their first-quarter results. (Monica Houston Waesch, Cooperated in Frankfurt, and Matthew Curtin, Paris.)