Profits for many car manufacturers were down in the first half of 2003, as the European motor industry started to feel the effect of recession and difficult market conditions.

Ford Europe announced a third quarter pre-tax loss of £266m compared with £145m in 2002. This was blamed on a planned reduction in dealer stocks, unfavourable net pricing, product mix and exchange rates, and the restructuring charge of £33m that included “personnel reductions”.

PSA Peugeot-Citroen also suffered as, prompted by weak sales in France and currency losses, it predicted group operating profits of £1.46bn for the full year (2002: £2bn), down from its previous forecast of £2.1bn. This accompanied third-quarter sales figures that suggest Peugeot might be close to losing its position as Europe's most successful mass-market manufacturer.

GM is also warning of missed targets for its European arms while DaimlerChrysler has seen operating profit for its Chrysler division drop to £102m, 52 per cent down on 2002 figures.

Mercedes-Benz, however, fared better with an operating profit of £551m, a similar figure to 2002. Volkswagen is set to report poor figures, with lay-offs in Brazil affecting already hard-hit profits.

With France, Holland and Germany all hit by recession – although the German market appears to be picking up – only Spain is showing any level of performance to match booming sales in the UK. Consequently even premium carmakers like BMW and Mercedes-Benz are finding the going tough, as rivals push cars into the British market, intensifying competition further.

Despite this MG Rover managed to cut losses for the fourth year running. Losses fell to £111m, 30 per cent less than the previous year, although bosses have issued a stark warning that the carmaker needs to start making a profit.

“MG Rover's losses constitute a drain on the group's substantial cash resources and while this can be sustained in the short term, MG Rover must start to contribute positive trading results,” says chief executive Kevin Howe.

In contrast, Nissan increased operating profit by 15 per cent to £2.15bn for the first half of 2003. In Europe its sales increased 6.6 per cent to 267,000 units from January to June although most of its success has come in North America where volume is up 11 per cent, and in China which saw a 33 per cent rise.