Mixed signals

While German carmakers like Volkswagen and BMW struggled to meet booming demand for their cars in August, distributors of imported cars in Germany introduced their deepest price cuts in nearly two years.

According to a new price index published by the Center for Automotive Research (CAR) at the University of Duisburg-Essen, the biggest reductions were offered by Italian manufacturer Fiat, which offered discounts of up to 35 percent on its Panda and Punto models. French carmaker Citroen offered 30 percent savings on special leasing deals for its Berlingo range.

Honda, Toyota, Volvo and Chevrolet also offered selected models with discounts exceeding 20 percent. The industry average for discounts was 11 percent.

Meanwhile, the Federal Motor Transport Authority reported an 18-percent increase of new registrations compared to last August, to nearly 238,000 vehicles.

Mixed signals

Those statistics give a rather contradictory impression of Germany's car market. An increase in price incentives suggests a struggling and highly competitive market, while the dramatic increase in new registrations points to a boom.

CAR economic expert Karsten Neuberger suggested the confusion may simply be down to a time delay. "The orders often happen some time in advance, and the registrations happen much later," he told Deutsche Welle. "We think that the market isn't really going that well at the moment. The next few months will show whether we're right."

The center's director, Ferdinand Dudenhöffer, offered another explanation. "There are some companies like Volkswagen that have a lot of order backlogs, which are being worked off, which is why there are excellent registration figures," he said. "A strong market doesn't need incentives."

"The manufacturers had relatively big problems last year," Neuberger added. "They had to get over the government's 'cash-for-clunkers' scheme, and the recession also affected sales."

Ruthless competition

Dudenhöffer was also very cautious about the current state of the market. "There are some very high price incentives at the moment – as high as last year," he said. "And last year we had the worst car market since the war. That shows how fragile the market is."

He added that the Federal Motor Transport Authority's registration figures showed just one side of the story. "The other side is that the market is very unstable, and is fighting with high incentives," he said. "And there's a real danger that the financial crisis will spill over into next year."

But on the other hand – the price cuts appeared to be working. Statistics show that demand for cars is on the rise.

"The mood in the car market is mainly positive, despite some cooling," said Volker Lange, president of the Association of International Motor Vehicle Manufacturers (VDIK), which represents import brands, while Volkswagen in particular reported good sales in the traditionally quiet month of August.

Author: Ben Knight
Editor: Sam Edmonds