BERLIN: Many automakers in Germany are offering substantial discounts on their vehicles, an approach threatening to cause a "bloodbath" across the industry.
According to figures from Autohaus PulsSchlag, the trade title, new car rebates currently stand at 12% in Germany, the highest proportion measured by the monthly study since August 2010.
The publication estimated that Fiat was cutting vehicle prices by 14.7%, with Peugeot Citroen and Renault both posting reductions of 14.1% on this measure.
"It's a bloodbath from a discount point of view," Andy Palmer, executive vice president for global planning at Nissan, told Bloomberg. "We work in an industry that needs volume – it needs to move metal – so manufacturers discount."
Data from ZDK, the trade body, also revealed that 87,454 vehicles in Germany were registered by dealers and carmakers and not consumers in June, equating to 29% of the market.
The number of these "pre-registrations" rose by 11% during the first half of 2012, considerably outpacing the category as a whole, which expanded by just 0.7%.
Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, suggested such cars are often ultimately discounted by 20% or more.
Doug Speck, head of sales and marketing at Volvo, added that this sort of activity encouraged a sense of "false euphoria" in the short term, but was destabilising over the long term.
"Many of our competitors are drastically pursuing volume and market share – to some degree at all cost," he said.
To an extent, softening demand elsewhere in Europe is also having an impact on Germany, where the economic climate has remained comparatively robust.
"Everyone is chasing the last remaining consumers in Europe, and all the cars that can't be sold somewhere in the south are now being shipped to Germany," Arndt Ellinghorst, an analyst at Credit Suisse, the investment bank, said.
This trend has even applied at the premium end of the market. Luxury carmaker BMW reported on a recent conference call that its prices had fallen by between 1% and 1.5%, and this doesn't include pre-registered units.
"Every day customers are coming to our showroom with offers from other brands or other BMW dealers," Werner Entenmann, the head of BMW's dealer association in Germany, said. "This is part of our daily routine.
"If the situation deteriorates further, BMW has to help the dealers save costs."
Data sourced from Bloomberg; additional content by Warc staff