MILAN - Europe's auto market is in freefall. Once the motor for Europe's economy, the car industry has fallen victim to the region's widening recession and soaring unemployment. Carmakers have suffered 18 straight months of declining sales as people worried that they might soon be out of a job put off making big purchases.
New car sales across Europe slid 10 percent in the first quarter of 2013 to 2.9 million, down from 3.3 million in 2012, the European automakers association ACEA reported from Brussels on Wednesday. Even in Germany, one of Europe's strongest economies, new car sales plunged 13 percent during the first three months of the year.
Across the rest of Europe, the figures were just as disappointing. Most major markets saw double-digit contractions: down 11.5 percent in Spain, 13 percent in Italy and 14.6 percent in France.
A banner reading 'Bochum. Good work.' is placed in front of he Opel car plant in Bochum, Germany, Wednesday. General Motors' loss-making Opel division has confirmed it plans to end production at the plant in Germany by the end of 2014. Adam Opel AG said Wednesday in a statement that the Bochum plant would wind down production as part of its plan to reduce costs and turn the division around. The plant's 3,200 workers make the Zafira compact.
The German fall - which was felt across the country's domestic industry from Volkswagen to Mercedes - took analysts by surprise. The country, after all, was still relatively prosperous.
"How can it be so bad when employment and economic growth remain solid?" said Max Warburton of Bernstein Research.
The answer lies in the demand-sapping problems of Europe's debt crisis. The economy of the 27-country European Union is on the verge of a recession after it contracted 0.5 percent in the last quarter of 2012 while unemployment is at nearly 11 percent. This has drained consumers across the EU of any confidence to make big-ticket purchases like a new car.
Based on ACEA's figures, Ian Fletcher, a London-based auto analyst with IHS, expects European sales to fall 3.3 percent overall this year to 11.8 million units. By comparison, many expect U.S. sales to reach 15.5 million for 2013, while sales in China could top 20 million.
The fortunes of its car industry have a big impact on the rest of Europe because any downturn it suffers is felt across the whole region. According to the ACEA, the auto industry directly employs 2.3 million - mainly highly skilled - people and supports about another 10 million jobs among the carmakers' suppliers.
The declining car market in Europe has been weighing on global carmakers' bottom lines. Last year, four of the biggest automakers based in Europe - Ford, PSA Peugeot, Fiat and General Motors - together posted operating losses of 5 billion euros ($7 billion) for the region.
According to the ACEA, in the first three months of 2013 General Motors saw sales drop 13 percent, PSA Peugeot sales were down 15 percent, Ford was down by 20 percent, Toyota 18 percent and Fiat 9 percent. In the premium market, which had continued to sell well as the mass market slumped, manufacturers were starting to feel the pinch. BMW was down a slight 0.9 percent while Daimler rose 0.2 percent.