The seasonally-adjusted annualised selling rate (SAAR) in West Europe's car market in March was just over 15 mn units/year. March was the first month so far this year to match the average SAAR for last year of 14.95 mn units (by definition, the average of the SAAR for a full year is the total number of sales in the year). In addition, the results for March showed a considerable increase in the selling rate on the two preceding months. The absolute volume of sales in March, compared with the same month of last year, was down by just over 4%, but, when adjusted for working days, was fractionally higher than last year.

Looking at the first quarter as a whole, the average SAAR was 14.5 mn units, and in comparison with the sales numbers during the first quarter of last year, the decline was approximately 4.4% in raw terms and 4.3% when adjusted for working days (we say "approximately" because some countries have yet to report final figures). This represents a decline of some 190,000 units to 4.1 mn over the quarter, on account of the much poorer sales in January and February. (Estimates to be published by ACEA in a few days will come out rather lower, since they exclude off-road vehicles in Portugal and Spain, and make no allowance for UK sales through channels other than UK dealers). March produced strong results in the UK, France, Italy and Spain, not only in comparison with the selling rate in recent months, but even in comparison with the long-distant world of 12 months ago. These strong results were not offset, as they have tended to be in the last few months, by further declines in the German selling rate.

The chart below shows total West European sales. The squares represent the total number of cars sold in a year, while the hollow dots represent the selling rate in individual months, and the continuous line represents a moving average of these. We indicate the latest two months.

The economic news coming out of Germany during 2001 has been almost uniformly depressing, ranging from last month's steep decline in the IFO index of business sentiment to the cessation of the downward trend in unemployment. The news from the car market continues to be absolutely in line with this impression of economic weakness. The seasonally adjusted selling rate has averaged 3.2 mn units/year over the 6 months from last October to the present (well below last year's full-year total of 3.38 mn units). Indications are that the results for March will show sales of a little over 350,000 units, which would be in line with this 3.2 mn selling rate (or even fractionally lower). The final results for February, at 236,150 units, represent a selling rate of just 3.1 mn units/year. During the first quarter as a whole, German sales were down by about 7%, compared with the same period of last year (which itself had been very weak) costing the industry 65,000 units in reduced sales volume. The incoming orders data still provide no indication that an improvement is imminent. There is little here to provide fodder for an optimistic interpretation, but if one is determined to look on the bright side, one could notice that the selling rate hit a trough in January, at the abysmal level of 3.0 mn units/year, and improved in each of the two following months.


"Germany -
There is little here to provide fodder for an optimistic interpretation
"

The French car sales data for March confirm the impression of a country that has so far suffered very little effect from the recent deterioration in the global economic climate. 209,649 car sales in the month represented a decline of under 1%, on what had been a particularly strong month last year. Adjusted for working days, this represents an increase of 3.9%. This very strong result brings the cumulative gain in car sales for the first quarter to 2.9%, which becomes 3.1% when adjusted for working days. (The CCFA press release says 4.5% on this basis, but while we agree with their working day computation for March, we do not agree with it for the first quarter as a whole). We judge the seasonally adjusted annualised selling rate (SAAR) to have been 2.19 mn units/year in March, and also in the quarter as a whole, slightly higher than the 2.13 mn units sold in the whole of last year. The indicator is in line with other relatively positive indicators from France, such as the continued fall in unemployment to 8.8%, and the recent upbeat assessment by INSEE of 3% GDP growth in 2001. The order intake for new cars during the first quarter was exactly in line with last year's level.

As far as the UK is concerned, March is a highly important month, and the results fully lived up to - even slightly exceeded - expectations. Sales through UK dealers reached 408,024 units, an increase of 1.5% on the same time last year. Expressed in terms of the SAAR, and making allowance for other types of sale (which appear to be running at about the same rate as last year) this represents a selling rate of almost 2.5 mn units/year, (compared to last year's total of 2.3 mn). Averaged over the first quarter as a whole, the SAAR has been 2.4 mn units/year, bringing the first quarter's growth to just over 2% compared with the same quarter of last year. The growth is entirely attributable to the 20% rise in personal sales over the first quarter, which more than offset the 12% fall in fleet and business sales. These figures show that, at least as far as car purchase is concerned, UK households are currently in a very positive mood, which will have been further helped by the 0.25% cut in interest rates on April 5th.


"UK -
results fully lived up to - even slightly exceeded - expectations.
"

In Italy, as in France, it would be quite inappropriate to stress the fact that sales in March, according to preliminary estimates by ANFIA, were below the year-earlier level. In both countries, March 2000 had been an exceptional month, and the fact that, after adjusting for changes in the number of working days, March 2001 produced exactly the same result, should be interpreted as representing a very strong outcome. Italian car sales volumes for the first quarter as a whole were down by 22,000 units, or 3%, but the selling rate during the first quarter of 2001 was exactly in line with last year's 2.44 mn units, and the rate in March itself was substantially higher, at 2.5 mn units/year. Last year, sales weakened somewhat in the middle months of the year, after the exceptionally strong first quarter. Incoming orders data show that about 4% fewer new contracts were placed in Italy in the first quarter than in the same period of last year, but here too we would not be too pessimistic about interpreting that result. The absolute volume of unfulfilled orders appears to be stable at a satisfactorily high level, suggesting no immediate change to the level of new registrations. Both Fiat and ANFIA have suggested that sales may be stimulated towards the end of the year by the withdrawal of leaded petrol after next January. In our view, the most of the people who currently own cars incapable of running on lead-free petrol are relatively unlikely to be in a financial position to replace these with new cars. The effect will be mediated through several layers of second-hand car transactions, and in any event the use of lead-replacement additives will prevent any sudden withdrawal of vehicles from circulation.

Spanish sales were once again supported by exceptionally strong rental demand. ANFAC estimate that sales to individual buyers other than rental companies fell by around 5%. However, total sales were a record for the month of March, at 158,290 cars and sports utilities, about 1.4% higher than last year even without adjustment for working days. This represents a SAAR of 1.5 mn units/year, very similar to last month, and brings the decline in sales in the first quarter (compared to the first quarter of last year) to just under 2%. The Dutch market had been very depressed in the first two months of 2001 following a VAT hike which pushed sales forward into last December. In March, it bounced back. Even though sales show a substantial decline on March last year, they represent a selling rate for the month which was close to last year's average. Sales in Belgium have continued to decline: the SAAR has dropped to around 450,000 units/year, compared to last year's 510,000. The Portuguese market has not only been weakened by the tax on sports utilities (now brought to the same level as that on cars). Just over 100 sports utilities were sold in March, compared to last year's 2,600. In addition, demand for other types of passenger car has itself continued to drift downwards. Total sales (including off-roaders) were down by 17% in the first quarter, and the March result confirmed that the selling rate is now around 240,000 units/year, rather than last year's 290,000.

Oxford, April 6th 2001.


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