Peugeot / VW - incentive race One man's meat is another man's poison. Look at the latest European car sector numbers, released on Wednesday. Volkswagen is feeding away - if not on fillet steak, at least in fairly healthy fashion. In the first nine months of 2012, it delivered 2.3m light vehicles in western Europe, down less than 3 per cent from comparable 2011 levels. That contrasted with a near-8 per cent fall for the market overall, so its share increased. In fact, about a quarter of all passenger cars sold in the region this year came from VW's stable (up from 23 per cent a year ago), with shares in all its five big markets steady or improving. Contrast that with the hunger pangs at Peugeot Citroën. Here, light vehicle sales in Europe, at 1.3m units, were down 15 per cent from the first nine months of last year. Light vehicle market share shrank from 13.5 per cent to 12.7 per cent. True, there are differences in how the two companies define Europe - so the figures are not directly comparable - and Peugeot's woes owe a lot to its high exposure to southern markets (such as Italy and Spain) which account for half its European sales. But the contrasting fortunes also reflect a profit-sapping battle over incentives and financing. Percentage discounts on vehicles are into double-digits even in northern markets such as Germany, trade reports note. Meanwhile, VW's solid financial position provides a big funding advantage - allowing the carmaker to compete fiercely on leasing and financing rates. Small wonder, then, that the French government is offering €7bn in guarantees to help Peugeot's finance arm avoid sub-investment grade rating status. Whether such aid will avoid a political spat is less clear: unfair state aid charges have been made, although Peugeot insists that the guarantees will be provided at market rates. The real trouble, though, is that this threatens to postpone capacity rationalisation. Ford, at least, is now closing its Belgian Genk plant. But an estimated 2m-3m units of European capacity needs to be lost. That could mean another 10 plants.