(MENAFN- The Peninsula) Daimler and Porsche provided evidence that the worst European car market in 17 years has started to spread to the luxury brands, mirroring a broader recession that has spilled from southern Europe to Germany.
Stuttgart, Germany-based Daimler said that operating profit at Mercedes-Benz Cars will fall this year, lowering a previous target of matching the 2011 figure, while Porsche plans to build fewer than the 155,000 cars and sport- utility vehicles originally planned for next year.
Daimler, Porsche, Bayerische Motoren Werke and Volkswagen's Audi brand have so far proved resilient to the plunge in sales that has plagued Fiat, PSA Peugeot Citroen and Renault. The German automakers have been sustained by a robust domestic market and booming exports to China and the United States. The German market is now also showing signs of weakening.
"If a downturn lasts for longer, which this one is, premium is not immune from pricing trends," said Arndt Ellinghorst, a London-based analyst at Credit Suisse. "The pricing environment in Europe is the biggest problem," with incentives spreading from Italy, Spain and France to Germany.
European car sales dropped 8.5 percent in August, the steepest decline since February, the Brussels-based ACEA industry association said. The group forecasts that European deliveries will hit a 17-year low in 2012. German car registrations fell 4.7 percent in August, pushing the eight- month sales figure to a 0.6 percent decline.
The region's volume carmakers, hit hardest by the European market's downward spiral, are taking even tougher measures. Peugeot agreed to sell a majority stake in its trucking unit to raise cash. Fiat's volume brands are eliminating 20 percent of management jobs in Europe, according to a person familiar with the matter.
Dealers in Germany, Europe's biggest economy, offered discounts on average of 12.1 percent off the sticker price last month, the highest rate in more than a year, according to industry publication Autohaus PulsSchlag. Price cuts by Daimler's Mercedes-Benz brand in August jumped to 11.7 percent from 9.2 percent a year earlier. Incentives at Audi widened to 9.7 percent from 9.2 percent.
The increased incentives helped Audi and Mercedes, the world's second- and third-biggest luxury-car producers, post sales gains last month in Europe, according to ACEA figures. Registrations at top-ranked BMW fell in the region.
Porsche, the Stuttgart-based maker of the 911 sports car and Cayenne SUV, will still increase production next year, though less than planned, spokesman Hans-Gerd Bode said. The VW unit is scheduled this year to build 140,000 vehicles. The slower growth rate "is due to the difficult economic environment, especially in Europe," said Lukas Kunze, another Porsche spokesman.
Mercedes-Benz Cars, which also includes the Smart city-car brand, has already been taking efficiency measures in response to the market decline and is setting up a savings project to be called "Fit for Leadership," Chief Executive Officer Dieter Zetsche said at a Stuttgart press conference. Details will be worked out in coming weeks, he said.
BMW is sticking to a 2012 forecast for record pretax profit and deliveries, said Mathias Schmidt, a spokesman at the Munich- based carmaker. Pretax profit in 2011 was ¤7.38bn. VW is also maintaining its forecast for operating profit to match last year's 11.3 billion euros, said Marco Dalan, a spokesman at the Wolfsburg, Germany-based company.
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