Data released by JD Power shows that the West European car market declined in June over the same month of last year. The forecaster estimated new car sales at 1.422m units - some 4.7% off last year's pace. However, JD power also said that on a seasonally adjusted basis June has proved to be the best month of the year so far, with sales taking an end-of-quarter incentives spike.

Summary

  • On a seasonally adjusted annualised sales basis, June proved the best month of the year so far with a selling rate of 15.3mn units/year.
  • Solid selling rates were posted in France and Germany, while the Italian and Spanish markets were only a little on the light side.
  • The UK market was year-on-year down for June, and some way lower in year-to-date terms.

The selling rate in Western Europe for June stood at 15.3mn units/year, the highest of the year so far. This end of quarter spike points to a continued use of incentives, though this peak was lower than last year. In the third quarter of 2005, build levels were reduced as manufacturers looked to reduce stock levels.

This lower sales spike in June would continue to indicate that the destocking last year has taken some of the pressure off manufacturers to push the market.

The French market performed well in the most recent month, with a solid performance also coming in from the German market. While the UK posted a firm selling rate last month, it was lower in year-on-year terms and the market is some way down for the first half of 2006. A small full year rise (circa 1%) is expected for the region.

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There was one less selling day in June, compared with the previous year.

Those who don't like football would have been advised to avoid Germany over the last month, given that the country has been hosting the football World Cup. The influx of supporters and media on the country has had an obvious positive impact on spending, but with the country getting behind its team (which initially hadn't been expected to do that well but reached the semi-finals) and the World Cup generally seen as a success, this has helped support already improving consumer confidence in the country as well.

For June, the market managed a selling rate of 3.45mn units/year, aside of May this is the best rate so far in 2006. For the full year, a market increase of 3-4% is forecast, with the expectation that the latter part of the year will be boosted by a pull forward in sales due to a VAT change at the start of 2007.

The UK car market was down 3.6% year-on-year for the month of June. This rounds off a lower market in the first half of 2006 compared to 2005, the recent period being hit not least by weaker consumer confidence. Retail sales were down further than business sales in H1 — the latter hit by a change in company car tax rules pulling sales forward to 2005. We expect the falls to ease a little in the second half of the year, with a full year fall of circa 4% expected.

Registrations in Italy eased back in June — the selling rate stood at 2.27mn units/year for the month, somewhat weaker than for the previous month, although better than a lacklustre April. Year-to-date though the market is in much better shape when compared with the same period of 2005. One reason for this is that the period in 2005 included a particularly weak month of May (due to a haulage strike) with the artificial drop in sales not fully unwound in the month after. A benefit to the market this year has come due to product launches from the Fiat group, most importantly that of the Grande Punto, with the group's volumes up around 20% for January to June (well ahead of the overall market). For the full year, an increase of circa 2% is expected. Next year, the market may struggle though with the macroeconomic picture looking lacklustre.

Car sales in France for June were virtually unchanged from a year earlier, and given fewer working days, this result is fairly impressive. Year-to-date the market is a little down on 2005 though. We anticipate a selling rate in the second half of the year similar to that in the first, with a market outturn of circa 2.1mn for 2006. Next year the market should benefit from improving macroeconomic conditions.

The selling rate in Spain dipped below the 1.6mn units/year mark for June, the first month of 2006 for this to have happened. The most recent month was also weaker when compared to June 2005. This relative weakness should not be viewed as particularly concerning though, with the Spanish market having hit a record high last year and remaining robust so far this year. We predict that for the full year the market will fall only a little short of 2005 given slightly slower rates of growth in important demand drivers, notably consumer spending.

Among the smaller markets, Belgium and Holland have improved well so far this year.

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