European Car Stocks Decline After Poor January US Sales

LONDON, Feb 4, 2003; Alison Tudor writing for Reuters reported that shares of European carmakers dropped on Tuesday morning amid fears they were losing share in a shrinking U.S. market and on caution ahead of results from German-U.S. car giant DaimlerChrysler.

U.S. auto sales released overnight showed a slowdown in January from the breakneck pace set a month earlier. Analysts said January's seasonally adjusted annual sales rate came in at about 16.2 million units, well off December's 18.3 million rate.

By 0914 GMT DaimlerChrysler was down 1.2 percent, Volkswagen, fell 2.2 percent, Renault eased 0.9 percent and Porsche also under pressure from analysts' downgrades -- lost 3.2 percent.

The DJ Stoxx index of European carmakers was down 1.12 percent after recovering about four percent since January 29. The sector was trading near one-and-a-half year lows at the end of last month.

"European auto makers have held back on incentives which has resulted in them losing some market share in the U.S.," said one car analyst in London.

French carmaker Renault slipped after its 44-percent owned unit Nissan Motor Co. Ltd. said its U.S. sales, including its luxury Infiniti division, were up a tepid 1.2 percent.

Volkswagen, Europe's leading carmaker, said its U.S. sales fell 16.6 percent to 17,811 vehicles in January, including its upscale Audi brand. Apart from weak market conditions, VW blamed its decision not to match deep discounts from other automakers.

Porsche saw its U.S. sales fall by 9.4 percent to 1,345 vehicles.

Analysts were also nervous about high inventory levels.

"Supply levels among European car makers are moderately high given the uncertain economic conditions and geopolitical factors," said Xavier Gunner, a car analyst at UBS Warburg.

DAIMLERCHRYSLER RESULTS

DaimlerChrysler was in focus ahead of its results due around midday when it is expected to post adjusted operating profit for the fourth quarter of 1.394 billion euros, according to the average forecast of analysts surveyed by Reuters.

The firm's U.S. unit, Chrysler, said late on Monday that it was raising consumer incentives after an 11.7 percent drop in its January U.S. auto sales and following similar moves by General Motors and Ford last week.

"DaimlerChrysler's sales were much weaker than the decline in the whole market which was not very encouraging," said Christian Breitsprecher, an analyst at Deutsche Bank in Frankfurt.

Meanwhile, HSBC cut its recommendation on Porsche to "reduce" from "add" with a price target of 330 euros.

UBS lowered its price target on Porsche to 400 euros from 410 due to lower 911 Turbo sales and higher inventory build following U.S. January car sales data.