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German car sales slump in wake of tax hike

German car sales plunged 10% during the Q1 this year, according to data released Thursday, following the hefty rise in the country's value-added tax in January.

New car sales fell 718,000 during the first three months of the year compared to the same period in 2006, Germany's motor vehicle authority (KBA) said. The slump followed big rises in German car sales in the run-up to the end of the year, as auto buyers sought to beat the January 3-percentage-point VAT increase by purchasing new vehicles. Leading the sales figures down was a slump in sales by Germany's mass carmakers. This included a 12.3% fall in sales by Volkswagen AG, Europe's biggest carmaker which is based in the north German city of Wolfsburg. Car sales of luxury brands also fell with Audi posting a 15.7% fall.

The release of the German new car sales data followed the release Wednesday of figures showing worldwide sales at Germany's leading Mercedes Car Group dropping by 8.2% in March to 127,000. An offshoot of transatlantic car giant DaimlerChrysler AG, the Mercedes Car Group includes the premium Mercedes-Benz and Maybach brands as well as Smart vehicles. The March fall brought the decline for the company during the first three months of the year to 2.8%. Sales of the luxury Mercedes-Benz brand fell by 2.0% year-on-year to 122,900 last month, said the company. Sales of the group's cartoon-style Smart minicars plunged 68.2% to 4,100 cars in March, the company said.

The drop in sales of German carmakers came amid signs that Japan's Toyota group has continued to strengthen its position in Germany, which is Europe's biggest auto market. During the first three months of the year, sales of Toyota's luxury Lexus brand rose 1.9%, as result boosting its German market share to 4.8%. (