FRANKFURT, April 11 - Western European car sales rose last month for the first time this year, as one-off factors offset any negative impact from the war in Iraq and France's PSA Peugeot Citroen made big gains, data showed on Friday. Brussels-based automakers association ACEA said car sales rose two percent in March from a year ago to 1.59 million vehicles, bringing sales for the first quarter to 3.80 million, still down 2.4 percent on last year. "These figures seem to indicate that the overall market has not suffered much from the start of military operations in Iraq," the ACEA said in a statement. The organisation added that March figures were helped by an extra working day in the month compared with a year ago and said Italian sales had benefited from a rush by consumers to make the most of a government incentive scheme before it expired.
"Taking those factors into account, we don't think March points to an upward trend, we are not optimistic about a recovery in auto sales for the full year," said one auto analyst at a German bank. Europe's second biggest carmaker PSA Peugeot Citroen was one of the biggest gainers in March, due mainly to its Citroen brand whose sales jumped over 17 percent. That helped the group to boost its market share to 15.3 percent in March at the expense of its biggest rival, Germany's Volkswagen . PSA said this week, however, the impact of war on western economies meant sales of new cars in western Europe may fall two percent this year, the lower end of a previous forecast. At 0804 GMT, Peugeot shares -- up 2.2 percent -- were leading European auto stocks higher. The DJ European auto stocks index <.SXAP> has fallen about eight percent this year, underperforming the broader market.
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Japanese automakers such as Mazda <7261.T> and Honda <7267.T> also clocked up gains, benefiting from a range of fresh models. Europe's biggest automaker Volkswagen, whose sales and marketing chief quit this week after disagreeing with Chief ExecutiveBernd Pischetsrieder over strategy, was hit hard. Its ageing product line-up puts it at a disadvantage and the group does not expect this year to match last year's profits.
Other weak performers were France's Renault , whose new Megane saloon is failing to offset flagging sales in older models, and Italy's loss-making Fiat . Car sales have suffered over the last year from a weak economic environment and subdued consumer sentiment, the main factors in long-term auto trends. Although the impact of the Iraq war has been muted so far, most industry experts warn against reading too much into a single month's numbers and still predict a drop of at least two percent in western Europe's car sales this year. "I don't think there will be a very dramatic (positive) effect after the end of the war," said Graeme Maxton of UK auto consultancy Autopolis. He noted that there might be an initial "feel-good factor", but on a more fundamental level, structural reforms were needed in some of Europe's biggest economies such as Germany to bring new impetus to the auto market. The European Commission has slashed its growth forecast for the 12-member euro currency zone to 1.0 percent this year from a previous forecast of 1.8 percent, reflecting swelling budget deficits in major economies and rising unemployment.
As car demand declines, pricing also tends to deteriorate as manufacturers turn to costly incentives to shift stock which dent revenues and profits. First quarter earnings for the auto sector kick off next week with the U.S.'s General Motors and Ford , followed by Germany's DaimlerChrysler , the first of the Europeans to report, on April 24. Daimler said this week a tougher business climate had made it far more difficult for it to raise profits as planned this year despite encouraging signs in the first quarter.//