Germany new car sales to shrink 3 percent in 2013, VDA forecasts image

New car sales in Germany could fall to the second-lowest level in more than two decades next year, according to industry association Verband der Automobilindustrie (VDA).

At a press conference in Berlin on Tuesday, the association said that new auto registrations in Europe’s largest economy may shrink about 3.2 percent to around 3 million cars in 2013 from an estimated 3.1 million this year.

As demand is hurt by the euro zone debt crisis, the German market may reach its second-worst annual result since 1991 after a low of 2.92 million in 2010, when registrations of new vehicles dropped 23.4 percent. The reason for the drop in sales in 2010 was that scrappage incentives that were introduced to support sales ended.

“We must brace for the difficult situation in the euro zone to persist in 2013. That’s why we’re keeping to a subdued forecast,” VDA president Matthias Wissmann said. So far, Germany’s flexible labor market and higher consumer confidence helped the market maintain its levels. However, car markets in weak southern European economies are suffering from budget cuts, tax hikes and lack of jobs.

Sales of new cars in Germany fell 3 percent in November to 260,000 vehicles, with the year-to-date decline at 2 percent or 2.88 million, VDA said.