German new car market to return to growth after sales decline slows in Sept.

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FRANKFURT (Reuters) -- After new car registrations in Germany declined at a significantly slower rate in September than in August, the VDA industry body said the German car market should return to growth towards the end of 2010.

New car registrations fell 17.8 percent in September to 259,748 vehicles. Registrations fell 27 percent in August due to a high comparison with last year's month that was distorted by the country's scrapping scheme.

"The trend change in new orders from domestic customers has finally been reached with September, when bookings rose over 10 percent. By the end of this year, we should be able to see rising registration figures in the domestic market," VDA President Matthias Wissmann said on Monday.

Barclays Capital economist Julian Callow said demand for new cars was encouraging and may present upside risks to his estimate of 0.3 percent rise in German private consumption in the third quarter over the second quarter.

"After France, Italy and Spain released (registration data) on Friday, one noticeable fact for Germany is that it is the only country among the Big Four to have experienced an increase in car sales in Q3 (2.88 million) compared to Q2 (2.78 million)," he wrote in a note on Monday.

"This 3.4 percent quarter-on-quarter pick up in Q3 is the first positive quarterly growth reading since Q2 2009."

Despite a 5 percent increase in exports, the very weak demand in Germany caused production last month to fall 3 percent to 534,700 vehicles.

Used car sales rise

According to official statistics from Germany's motor vehicle department, registrations of used cars sold gained 19 percent in September and 5.7 percent in the first nine months of the year.

Strong demand for pre-owned cars often presage a return of pricing power in the new car market as well as stronger earnings at manufacturers' captive financial services units that rely heavily on resilient residual values for cars coming off lease.

Germany's 5 billion euro pot of tax money to subsidize new car sales was exhausted at the beginning of September 2009, ushering in months of very weak demand as many purchases expected for this year were pulled forward to take advantage of the scheme.

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