2nd UPDATE: European Car Market Skids In May Despite Incentives

European new-car registrations last month skidded 4.9% year-on-year, but Germany's Volkswagen AG (VOW.XE) and Italy's Fiat SpA (F.MI) saw demand rise as scrapping incentives fueled sales of smaller cars.

New-car registrations in Europe dipped to 1.27 million vehicles in May, the 13th consecutive month of shrinking demand, despite successful scrapping initiatives in several major markets that cushioned the fall, the European Automobile Manufacturers Association, or ACEA, said Tuesday in a statement.

In the first five months of the year, registrations in Europe were down 14% compared with the same period last year at 5.96 million vehicles.

Registrations in Western Europe, a key source of earnings for global automakers, were down 3.2% at 1.2 million in May and slumped 13% on the year in the January-to-May period to 5.6 million passenger cars.

May counted on average one working day less across the region.

Volkswagen, Europe's largest automaker by sales, posted a 3.1% rise on the year to 278,933 new-car registrations, a measure of sales, thanks mainly to a 9.2% increase at its core VW brand to 152,603 vehicles. Fiat eked out a 2% rise to 116,243 cars in Europe.

The other major automakers faced contracting sales in Europe in May.

General Motors Corp.'s (GMGMQ) troubled European division last month suffered a 10.8% fall on the year to 118,602 new-car registrations as a 3.9% rise to 17,295 registrations at the Chevrolet brand failed to offset a 9.6% fall at Opel/Vauxhall to 98,935 cars.

Opel and its British brand, Vauxhall, currently are in talks to finalize a takeover by Canadian auto supplier Magna International Inc. (MGA) and its Russian partners OAO Sberbank (SBER.RS) and OAO GAZ Group (GAZA.RS).

GM's Saab brand, which filed for creditor protection in February and is reportedly close to being sold to Swedish sports-car maker Koenigsegg, saw European registrations erode 66% to 2,191 cars last month.

Ford Motor Co.'s (F) European unit posted a 5% fall on the year to 125,395 registrations in May as the Swedish Volvo brand suffered a 20% fall to 15,197 cars. Ford's core brand saw registrations slip 2.4% to 110,198 cars.

French automakers Renault SA (RNO.FR) and PSA Peugeot-Citroen (12150.FR) performed roughly in line with the overall market. Renault saw its new-car registrations drop 4.4% to 112,064 cars while Peugeot's registrations fell 5.9% to 165,167.

Renault's performance benefited from strong demand at its Romanian low-frills Dacia brand, where European sales last month doubled year-on-year to 24,894 cars. The core Renault brand accounted for 87,170 cars, down 17% on the year.

The economic downturn continued to hurt luxury car sales in Europe last month as the region's scrapping incentives sparked demand mainly for small and fuel-efficient vehicles rather than larger, premium cars.

The world's two best-selling luxury automakers, Daimler AG (DAI) and BMW AG (BMW.XE), saw sales fall 8.9% to 61,714 cars and 14% to 65,490 cars, respectively.

European new-car registrations for Toyota Motor Corp. (7203.TO) were down 8.9% on the year in May at 59,266 vehicles, with the Lexus premium brand posting a 48% fall to 1,234 cars.

Company Web site: www.acea.be

-By Christoph Rauwald, Dow Jones Newswires; [phone]; [e-mail]