Weak first-half earnings and reduced 2006 outlook by Peugeot Citroen underscore the tough conditions that mass car makers serving Europe continue to face, analysts have said.
Dresdner Kleinwort car sector expert Arndt Ellinghorst said: "It's a wake-up call for investors again that pricing in western Europe is under pressure.
"You have to consider that 50 per cent of the European car market is penetrated by companies that hardly make a profit."
"If it is not already a sick market it is becoming a very problematic market because all these guys are fighting for market share."
It was easy to make a profit in the volume business in "such a fragmented market and with such price competition."
Mounting costs for raw materials including copper, zinc and aluminium are also turning up the heat on carmakers who have to count on fresh products to attract customers given flat demand overall and encroachment by Asian rivals.
"It is a perfect storm - raw materials up, pricing down, competition fierce. It is very tough indeed and the demand outlook is not particularly good," said one London-based car analyst who asked not to be identified.
Peugeot, whose operating margin dropped to 2.4 per cent of sales in the first six months, forecast that the western European market, where it generates 70 per cent of car sales, would stay strained "with ever-increasing competition and stable demand".
Optimists hope that Germany's three-point rise in value-added tax rates at the start of next year will trigger a late 2006 buying spree in Europe's biggest car market.
Italian industrial group Fiat bucked the trend by reporting forecast-beating second-quarter results thanks in part to the revival at its autos business.
Volkswagen, which reports results today , has also been making strong sales gains in Europe and the United States amid a new model offensive.
New models - including the top-of-the-line S-Class executive car - are helping DaimlerChrysler's Mercedes-Benz brand generate record sales, but US arm Chrysler has been sucked into the US discounting swamp.
It also reports results today, as does Renault, whose new product cupboard is bare this year.