Concern Grows As Car Sales Fall Globally

By EDWARD TAYLOR in Frankfurt and GORDON FAIRCLOUGH in Shanghai

A worsening slump in auto sales in Europe and signs of a possible slowdown in China are fueling worries about a global auto industry already battered by trouble in the U.S.

Some forecasters in Europe are considering lowering sales projections following sharp declines last month in auto sales in Spain, Britain and Germany. In China, where booming sales have been offsetting the shortfalls in more mature markets, auto sales fell in August, the first monthly decline in more than two years.

Though analysts think growth in China will resume in the months ahead, a softer market there would leave the world's auto makers facing a bleak landscape.

Associated Press

China's auto sales fell in August, the first monthly decline in two years.

"There is a lot of concern out there that the slowdown that we are seeing in the U.S. is spreading across the globe," said John Casesa, a partner at the Casesa Shapiro Group, an automotive consulting firm. In the U.S., the world's largest auto market, sales of new cars and light trucks are on track to fall 10% or more this year to between 14 million and 14.5 million vehicles, down from 16.1 million in 2007.

Until a few months ago, other regions seemed to be holding up and softening the blow of the U.S. downturn. China was a key bright spot with sales rapidly expanding. But over the summer, Western European auto sales began to falter, and now the decline appears to be worsening. And the outlook for China seems more uncertain than before.

Last month, the number of autos sold in China fell about 6% from a year earlier, the first decline in more than two years, according to the China Association of Automobile Manufacturers. Sales for the first eight months of the year were still up more than 13% from the 2007 period. That is a robust expansion compared with the lagging mature markets of North America and Western Europe, but slower than the 30% increase in Chinese car sales in 2006, and a rise of more than 21% last year.

A slower pace of growth had been widely expected in China this year, as rising gasoline prices, mounting inflation and government efforts to cool the economy combined to damp sales. A weak stock market has also hurt consumer spending. Michael Dunne, managing director of market-research firm J.D. Power & Associates' China operations, said September's sales total will be "pivotal" for giving industry executives a clearer picture of the future trend.

Mr. Dunne added that inventory has been rising at Chinese dealerships. "Dealers say they just aren't seeing the same number of people going into showrooms as they did earlier in the year," he said.

In Europe, the trend is darker. In August, new-car registrations fell 41% in Spain, 18% in Britain, 10% in Germany and 7% in France.

Falk Frey, senior vice president at Moody's Investors Service, said bigger-than-expected declines in passenger-car registrations in Spain and Britain over the past two months may force the ratings service to further scale back its car-sales outlook for 2008.

In June, Moody's lowered its projection for new-car registrations in Western Europe to 14.4 million cars from a January estimate of 14.9 million for the year.

Write to Edward Taylor at edward.taylor@wsj.com and Gordon Fairclough at gordon.fairclough@wsj.com