Impact: Renault CEO expects 5%-6% drop in the French car market image

New car registrations in France and Spain fell last year signaling a broad downturn in car sales as the continued economic slowdown saps European consumer demand.

For 2012, Renault CEO Carlos Ghosn painted a gloomy picture of the outlook for carmakers in Europe, saying he expects automobile sales in the region to decline 2%-3% and 5%-6% in France.

“It’s going to be tough for everyone, not just for Renault,” Ghosn said in an interview on the France Inter radio station on Tuesday.

“What really worries us is France, as we’re very sensitive to the French market, and we expect the French market to contract by between 5% and 6%,” Ghosn said.

Sales of French homemade brands fell by 7 percent last year mainly due to the drop in Renault sales. The second largest carmaker in France sold 9.6 percent less cars with sales of low-cost brand of Dacia slid by 15 percent.

A weaker French economy could make France the next target for bearish investors. Already on Tuesday, the country’s borrowing costs spiked as the interest rate on 10-year French government bonds rose three percent to 3.31 percent.

The French economy probably shrank 0.2 percent in the fourth quarter and may shrink another 0.1 percent in the current three-month period, before expanding 0.1 percent in the second quarter of 2012, Insee forecast on Dec. 16.

LMC Automotive estimates industrywide car sales in western Europe will fall to 12.1 million vehicles in 2012.