Hefty Incentives Buoying U.K. Car Sales

Britain bucked the downward trend in European auto registrations last year and in January. But to attain the U.K. gains, carmakers are now dangling incentives so large that they are eroding profits, Reuters reports.

The country's registrations rose 5% to 3.04 million vehicles in 2012 compared with an 8% decline across Europe to a 17-year low of 12.53 million units. In January, U.K. sales climbed 12% compared with a 9% drop in the regional auto market.

Ford is currently offering many of its models in the country at discounts of more than 12%, according to Reuters. It says General Motors' Vauxhall unit is reducing upfront cash requirements on some models in the U.K. and granting interest-free financing for as long as five years.

The strength of the British pound against the euro makes imported cars cheaper, thus giving automakers more leeway to cut prices, the news service adds. It notes that in the U.K. carmakers also can offer big discounts to encourage dealers to buy and register vehicles, then sell them later as used cars.

Both factors are causing automakers to divert auto shipments to Britain from other European markets.