Car sales in Europe continued to be low owing to weak consumer confidence on the back of a weak economy triggered by the sovereign-debt crisis in Euro zone. The European Automobile Manufacturers’ Association, or ACEA, reported an 8.7% fall in new car registrations to 1,107 million units in the European Union in May. In the first five months of the year, sales fell 7.7% to 5,442 million cars in the continent.

All the major markets, including Germany and France, posted steep decline in sales while only U.K. recorded an improvement. Car sales dipped 4.8% in Germany to 289,977 units, 16.2% in France to 165,691 units. Meanwhile, it rose 7.9% in the U.K. to 162,288 units.

Volkswagen AG (VLKAY), the largest car manufacturer in the continent, posted a 5.7% decrease in sales to 272,157 units in May and a 2.4% fall in the first five months of 2012. Sales at PSA Peugeot Citroen plummeted 19.5% to 132,561 units in the month and 15% in the five-month period under study.

On the other hand, U.S. automaker General Motors Co. (GM) revealed an 8.4% slide in sales to 98,873 cars in May. This translated into an 11.3% fall to 453,696 cars in the five months period.

Automakers are still concerned about car sales in Europe in the near term due to the continuous negative impact from the debt crisis. Some automakers have projected that European auto market will shrink 5% in 2012.

Last month, U.S. saw a strong 18% growth in sales to seasonally adjusted annual rate (SAAR) of 13.8 million units from 11.7 million units in the same month of 2011 driven by lower gas prices, better access to credit, improved trade-in values for new cars, and, as usual, strong pent-up demand. All the major automakers posted strong sales gains.

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Zacks Investment Research