TM Toyota Motor Corporation

FRANKFURT—The European auto industry's extended its winning sales streak to two years in August, but concerns about meager profit prospects in the region overshadow expectations for further growth.

New car registrations rose 11.5% last month compared with the same period in 2014, leading auto makers and analysts to maintain expectations for between 5% and 7% industry growth this year. Carlos Ghosn, chief executive of France's Renault SA, expects a modest 2% growth rate in 2016.

"There is still room for growth," Mr. Ghosn said during a news conference at the Frankfurt auto show on Tuesday. Renault has several models doing well in Europe, including pricier sport-utility vehicles that are growing in popularity in the region after years of playing second fiddle to passenger cars.

Still, concerns about profitability persist in Europe, where fierce discounting coupled with a glut of production capacity hurt auto makers' bottom lines.

"The unit volume is up, but the overall numbers disguise the underlying health of the market," Ford Motor Co. European Chief Jim Farley said in an interview. "It's still challenged."

The clouds over Europe's sizzling car industry contrast the unvarnished enthusiasm concerning the U.S. market, which along with Europe is helping keep global light-vehicle sales afloat as Chinese auto sales skid. Unlike the U.S.—running at the highest pace since 2001 amid brisk demand for profitable trucks and SUVs—Europe's recovery is currently concentrated in the south, where a preference for low-margin small cars tempers optimism.

Among the best performing markets in Europe are Italy, Spain and Portugal, which have taken longer to recover and tend to be a hotbed for smaller cars that thrive in small cities. Mr. Farley and other executives said markets that recovered earlier in the cycle, such as Germany or the U.K., are more heavily dependent on low-margin rental car sales or purchases made by dealers rather than by actual consumers.

Commercial vehicles, generally profitable, are steady sellers, providing Mr. Farley with optimism given Ford's strong position. Volkswagen AG and Daimler AG also have strong presence in the European commercial vehicle market.

Ford has been losing money in Europe since 2011, and Mr. Farley notes that although the company is closing in on break-even results in the region, the company will remain disciplined in its approach to rental car selling or discounting practices that can damage the brand.

Toyota Motor Corp.'s European leaders echoed that strategy. Still, auto makers are relying on continued growth in Europe to help them meet ambitious targets and a drop in volume would add to headaches already felt due to weakness in Russia, China and South America.

Karl-Thomas Neumann, chief executive of General Motors Co.'s Opel unit, aims to achieve profitability in 2016 but he said on Tuesday at the auto show the company will need a bit of luck to pull it off.

The company's ability to push through higher prices, for instance, will be a factor in meeting the profit goal, he said. GM narrowed its operating loss in the second quarter and, in an internal letter sent to employees on the day those figures were released, Mr. Neumann said reaching the profitability goal would be "anything but a walk in the park."

Didier Leroy, head of Toyota's Europe operation, said there is considerable pressure on prices in Europe. He also said the recovery of car sales in Europe may have peaked, and this could test the amount of pricing and production discipline auto makers employ.

"We can't expect this level of growth to go on [in Europe]," he said. "It doesn't mean there will be a decline, but the level of growth will decrease."

New car registrations, a mirror of sales, reached 781,676 vehicles in August in the European Union and European Free Trade Association. That was up from 701,251 in August 2014, the Association of European Automobile Manufacturers, or ACEA, said.

August marked the 24th consecutive month of growth in Europe. "August is typically one of the weakest months for registrations, together with February, however the month saw continued growth in all major markets," ACEA said.

In the first eight months of 2015, new car registrations were up 8.6% to 9.38 million vehicles, compared with 8.64 million in the same period a year earlier.

William Boston and Hendrik Varnholt contributed to this article.

Write to John D. Stoll at john.stoll@wsj.com and Sarah Sloat at sarah.sloat@wsj.com

Access Investor Kit for "Toyota Motor Corp."

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=JP3633400001

Access Investor Kit for "Toyota Motor Corp."

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US8923313071

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

September 15, 2015 14:25 ET (18:25 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.