After a profit warning last week from German manufacturer Daimler AG, Europe's industry body reported a 7.9% year-on-year drop in sales for June. That's the biggest decline this year, and the ninth in the last 10 months.
Raging trade wars have already put factory confidence under pressure and top exporter Germany is at risk of a recession. The rising potential for a hard Brexit dragged the U.K.'s pound to its lowest level this week since 2017.
A combination of factors likely fed the monthly decline in Europe, said Marco Valli, chief euro-zone economist at Unicredit in Milan. He noted strong industry growth in recent years and issues around diesel vehicles.
New-car registrations dropped more than 8% in France and Spain, while German and U.K. sales fell 4.7% and 4.9% respectively, the ACEA said Wednesday.
At the year's half-way mark, Europe is likely facing a second annual decline in car sales. The industry association has already revised its prediction for the year to a 1% drop, blaming uncertainty surrounding Brexit and flattening demand. It had previously forecast a 1% rise. Before last year, the industry had enjoyed uninterrupted annual growth since 2013.
"We're standing in front of a difficult second half of the year," said Peter Fuss, a partner at EY consultancy. "Little positive impetus for the new car market in the EU can be expected in the coming months."
The Stoxx Europe 600 Automobiles & Parts Index declined as much as 1.2%. Volkswagen AG fell as much as 1.4%, while Renault SA dropped 1.2%.
After Nissan, Honda and Fiat-Chrysler registered the worst sales in Europe since the start of the year with 15.4% and 9.5% declines respectively.