Auto sales in Europe plummet 20 percent in April, daunting hopes of a recovery

Europe’s new car sales shrank for the 10th straight month as the industry continues to be mired in supply chain crises that are fueling record inflation and threatening to scare off car buyers.

Registrations fell 20 percent in April to 830,447 vehicles, the Association of European Automakers said on Wednesday, the steepest drop this year.

Stellantis NV, the automaker formed by the merger of PSA Group and Fiat Chrysler, was the hardest-hit among the major manufacturers, down 31 percent.

Issues curbing production — most notably the global semiconductor shortage — have prompted forecasters at LMC Automotive to cut their estimates for Western European car sales over the past four months.

They now expect annual shipments to fall 6 percent this year to less than 10 million units.

LMC was already calling for growth of almost 9% in January. Automakers have managed to make up for the lost volume with higher prices, although it’s unclear how much higher they can go.

“Global supply concerns are showing no significant signs of easing, while underlying demand prospects are also deteriorating,” LMC wrote in a report this month. “Households will experience serious real income pressures this year. Supply issues remain the key determinant of registrations for now.”

Among the largest European markets, Italy saw the sharpest decline, falling by a third, while registrations in Germany and France fell by more than a fifth.

The shortage of chips holding automakers back is taking longer than expected, forcing some buyers to wait 18 months for certain in-demand models.

Volkswagen AG CEO Herbert Diess said last week the company is completely sold out in the US and Europe this year when it comes to electric cars.

VW CEO Diess and Ola Kallenius, CEO of Mercedes-Benz Group AG, are hoping for an improvement in the range of semiconductors in the second half of the year.

But hopes for a recovery in the coming months also depend on factors, including the potential for more disruption related to the war in Ukraine.

Global supply chains are also starting to feel the effects of China’s zero-tolerance approach to containing the coronavirus.

“Container ships are piling up in Chinese ports,” says Peter Fuss, a partner in EY’s automotive team. “It will take months to normalize this bottleneck.”