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By Michael Shields, European Auto Correspondent
FRANKFURT, Jan 24 (Reuters) - Business couldn't be worse for Alfred Bettschnitt, who runs thedealership Autohaus am Hainberg in the southern German city of Nuremberg.
"It is a collapse, definitely," Bettschnitt complained this week as the buying frenzy late last year -- before Germany raised value-added tax rates by three percentage points -- came to an abrupt halt this month.
"I assume the market will normalise in the second half of the year but it wouldn't be able to compensate," he said. "The only ones who are buying now are those who have to."
It is a tale of woe being repeated across Europe's biggest car market, especially for dealers who rely primarily on price-sensitive retail customers rather than corporate fleets.
"There is a small downturn. We had been at a very high level, stimulated by the VAT issue," said Bernd Teuschler, sales manager at Autohaus Karl Ruhl, adealer in the Frankfurt suburb of Oberursel.
"The demand is still very good, but we do not have the high levels of deal closings that we had had," he said.
Retail buyers accounted for just under half of new car sales in 2006, although tens of thousands more vehicles went to self-employed buyers who list them as company cars.
German-made brands like Mercedes-Benz ,and Audi have a higher percentage of sales to corporate customers than do foreign brands like and .
RUSH TO BUY
No sales figures for January were immediately available, but the ZDK car dealers association said a slump in Germany's 137 billion-euro market for new and used cars was no surprise.
"A downturn is of course to be expected after the registrations we saw in November and December," ZDK spokeswoman Claudia Schiffer said.
Registrations of new cars rose 18 percent in November and 17 percent in December, helping the market advance nearly 4 percent in 2006 to 3.47 million cars. Sales to retail buyers leapt 35 percent in November and almost 40 percent in December as people rushed to buy big-ticket items at the old 16 percent VAT rate.
ZDK estimates that 60,000 to 70,000 orders were brought forward into the last quarter of 2006 ahead of the VAT increase. The fact that new car orders fell 8.4 percent in November and 11 percent in December signalled a soft patch was approaching.
ZDK forecasts that overall car sales in Germany should hold at least steady this year at 3.4 million new vehicles and 6.85 million used cars, but adds that an ongoing price war will keep dealers under severe pressure again in 2007.
Germany's VDA car industry association has also warned that higher VAT and insurance taxes plus reduced tax breaks for commuters would weigh on car sales early this year.
It has placed its hopes in an economic upswing that has boosted consumer sentiment and the fact that replacement demand should be good given that the average car on the road is now around 100 months old -- a record.
For a table of German car registrations by brand in 2006, click on [ID:nL23829308]