As we posted earlier this year, car sales in the European auto industry have been on the upswing for nearly two years. This continued in July as sales rose in Germany, France, Italy, and Spain. Spain posted the biggest gain, with a 24 percent increase in car sales, marking 23 straight months of growth. Sales in Italy also showed a substantial increase of 15 percent in July.

As a result of the continued strength of the European auto market, European auto makers such as VW have pushed to the lead in global sales, and carmakers such as Volvo increased their earnings goals for the year.

On the other side of the globe, China auto sales continued to slow down. Chinese auto sales fell in July, falling to a 17-month low. GM, Ford, and Nissan all saw decreased sales in China for July. Automakers including VW and BMW indicated that slumping sales and industry pricing in China could impact overall profitability. China’s move to devalue its currency is further predicted to impact international auto manufacturers’ cash flow, and particularly U.S. automakers in light of the relatively strong dollar. However, the overall long term impact will depend on a number of factors, including companies’ currency hedging, the potential decreased cost of Chinese manufacturing operations, and whether contracts with Chinese suppliers are in U.S. dollars or yuan.

With the wide swings across the globe and China’s actions with the yuan, the industry will continue to closely watch the impact of the global economy in the second half of 2015.

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