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Europe’s Car Boom Leaves Auto Makers Hunting for Profits

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After years of cost-cutting, slimming and moving production to low-wage countries, Europe’s car makers should be sitting pretty. But in the midst of their biggest sales boom in years, the payoff for many has been barely break-even.

Cheap financing and pent-up demand have driven 2015 European car sales to the highest level in six years. IHS Automotive reported on Wednesday that sales in Western Europe—which accounts for about 80% of the continent’s total—rose 5.1% in March. Gains were lifted by Italy, which posted a 17% increase, and France, where sales jumped 7.5%, both over a year earlier.

“Europe is a place where a good year means the car industry breaks even,” said Adam Jonas, an auto analyst with Morgan Stanley.

That bodes ill for most mass-market brands. The rebound is helping luxury brands rack up record profits. But the companies relying on larger selling mainstream autos have hardly benefited, dogged by intense competition, overcapacity and changing consumer buying habits.

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