European Car Sales Hit A Pothole

Michelin Wants More

LONDON -

Consumers are thinking twice before buying a new car as fears of a global recession rise. This is hurting sales and threatening to further weaken the automotive industry, the European Automobile Manufacturers Association warned on Wednesday.

New vehicle registrations fell 8.2% year-on-year in September despite two extra working days, as the fallout from the financial crisis hit auto manufacturers hard, reported the European Automobile Manufacturers Association, which represents the 15 major European vehicle manufacturers.

Registrations for the European Union, excluding Malta and Cyprus and adding European Free Trade Association countries, totaled 1,304,583, the lowest September level since 1998, the association said. Over the first nine months of the year, sales for the region were down 4.4%. In western European markets, September new registrations fell 9.3%, to 1,211,308, from the year-ago period.

"Manufacturers were already under immense pressure to sustain their production of environmentally friendly products in line with the current legislation," Sigrid de Vries, a spokeswoman with European Automobile Manufacturers Association, told Forbes.com.

E.U. legislation is forcing carmakers to meet C02 standards for their entire fleets by 2012, but firms argue the deadline isn't economically feasible.

"The current financial circumstances are adding even more pressure to carmakers as consumers think twice about getting a new car, which is the second largest expenditure people make after a house," Vries said.

But are signs pointing to unprecedented bad times for carmakers? "It's a dramatic situation and if the economic circumstances continue to deteriorate sharply and consumer confidence drops further, the market could come to a halt," she said.

Chief executives of the main car manufacturers warned during the Paris Auto Show that the conditions for the industry have deteriorated dramatically. As a result, companies are cutting production and jobs aggressively. (See "Ghosn: We Can't Restore Investor Confidence.")

On Tuesday, Daimler (nyse: DAI - news - people ) said it will drop its Sterling truck brand in March 2009 and close two Sterling plants to address depressed demand across the industry. The company also said it was cutting around 3,500 jobs in the U.S. and Canada to cope with the slump in the economy. (See "Daimler Downshifts Truck Operations.")

The shaky economy and a global crisis of confidence in the financial markets have undermined the car industry. (See "Car Industry Headed For A Wall.")