The decline in European car sales in March looks severe, at over 6% compared to the previous March. But almost all of this decline is accounted for by the fact that the Easter holiday occurred in March this year, but not last year. If we look behind the raw figures to the seasonally (and calendar) adjusted selling rate, it emerges that the underlying level of demand in March was actually slightly higher than it has been in the two previous months of the year. But again the UK market was unusually strong helping to compensate for weaker sales elsewhere.

Summary

• Once more, a surge in demand from the UK has made up for a flagging market in the rest of Western Europe. Sales in the UK accounted for 27% of total West European car sales last month. Even though March is always an exceptionally important month for UK sales, this proportion was only 25% last year, and 23% the year before.
  
  
• Because the Easter holiday occurred partly in March this year, there were two fewer selling days in the month. The decline in the absolute number of sales compared to March last year looks less alarming (and the UK figure looks even more remarkable) when this is taken into account.
  
  
• The Italian market gave particular cause for concern last month, falling by 19%. Even though there are mitigating factors, it is clear that the hangover from the artificially high sales at the end of last year is now having a powerful negative effect.
  
  
• Because of uncertainty about how the holiday will have affected the last few selling days in Germany, there is still a margin of error around any estimate for the full month. However, the results are modestly encouraging, and we think that the selling rate will prove to have been higher than so far this year, and that the results for the full month will show an increasing in the numbers sold per selling day, compared to last March.
  
  
• French sales are holding up relatively well, but the Spanish market is once again weakening.

The decline in European car sales in March looks severe, at over 6% compared to the previous March. But almost all of this decline is accounted for by the fact that the Easter holiday occurred in March this year, but not last year. If we look behind the raw figures to the seasonally (and calendar) adjusted selling rate, it emerges that the underlying level of demand in March was actually slightly higher than it has been in the two previous months of the year. The selling rate remains at just under 14.7 mn units/year. To be sure, sales are falling overall, but the year-to-date result is less severe than the March fall. The year-to-date decline of about 3.5% in car sales is virtually unchanged if light commercial vehicles are taken into consideration as well, and also if the countries of Central Europe and Turkey are added to the results for Western Europe.
 
Bringing seasonal and calendar considerations into the analysis therefore provides some reassurance. But what is worrying in the March result is that it shows an ever greater reliance on an exceptionally, and surely unsustainably, strong UK market to offset the weakness that is becoming increasingly evident elsewhere in Europe, and especially in Italy, Spain and Portugal.

“Once again, March produced a truly exceptional result in the UK. “

Once again, March produced a truly exceptional result in the UK. Typically, the UK accounts for about 15% or 16% of overall West European car sales. In the first three months of this year, it has generated almost 19%.
 
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 most recent numbers underlying this chart are appended in the table at the end of this note. 

Results for Germany are subject to more than the usual uncertainty, because the precise effect of the early Easter on the volume of sales at the end of the month is still unclear. But it looks likely at this stage that the month will produce only a small decline, of around 4%, which is less than what would have been justified by the calendar effects. The stock of outstanding orders is still giving cause for concern, but the inflow of new orders is beginning to look a little more encouraging, after a very poor result in the preceding month. We are fairly confident that the seasonally adjusted selling rate in March was higher than in the 3.2 mn units/year rate that we saw in the two preceding months of the year. A 3.3 mn selling rate is what we are expecting to see once the results for the full month are known. As our Table shows, this is similar to, but still slightly below, the average selling rate last year.

The Ministry of Transport’s initial estimates for Italian car sales in March came in at 205,500, a fall of 19% on March last year (or 18.4% compared to the original year-earlier estimate). This is of course a far more severe decline than calendar effects alone could account for. The Ministry of Transport reported some computer glitches in processing the data, but it appears that these affect the market shares of individual marques, rather than the overall total. The selling rate of 2.13 mn units/year represents a significant decline from the 2.2 mn units/year that we saw in the first two months, and is the lowest selling rate in six years.

“The level of incoming orders [in Italy] also dropped sharply, by some 16%.”

The level of incoming orders also dropped sharply, by some 16%, which of course provides a warning note about future sales prospects. The only slightly reassuring point that can be made is that the bank of outstanding orders is still fairly large. It appears that the largest falls in sales during March were suffered by some of the older models that had been heavily promoted last year, such as the Fiat Punto and the Volkswagen Golf.
 
198,459 cars were sold in France in March. The 5.6% decline is not very different from what would have been expected, purely on the basis of the calendar changes, so there is no particular cause for alarm in this figure. The SAAR during the month was 2.23 mn units/year, exactly the same as in the two preceding months, and indeed little different from last year’s out-turn. France therefore remains in an intermediate position among the major European countries. The level of demand is not weakening, as in Germany, Italy and Spain, nor is it enjoying the stellar volumes of demand that are being seen in the UK. French demand remains steady at a high level, and the flow of orders does not suggest any change from this.

March 2002 will be fondly remembered for a long time by UK car dealers, who sold nearly 424,000 vehicles. (Our figure also includes an estimate of non-dealer sales). In one sense the result was unsurprising: the selling rate of 2.75 mn units/year was exactly in line with the previous month, and indeed with the average of the last half-year. But it is one thing to have a high selling rate in an off-month like February, and quite another thing for it to be repeated in a peak selling month like March. A contrast to preceding months was that the strong result owed more to fleet and business sales, which showed a 5.8% year-on-year gain during the month, compared to the 2.1% rise in private sales.

Spanish car sales, including 4x4s, came in at 132,069 units during March. The 15.7% fall is far in excess of what calendar effects alone could have caused, and represents a disappointing selling rate of 1.38 million units/year.

“The downward trend in Spanish demand is now unmistakable. “

The downward trend in Spanish demand is now unmistakable. A further worrying sign is that the sales of cars to rental companies actually rose by 7.2% in the month, so that the fall in demand by private buyers and by non-rental companies was even greater.

Among the smaller countries, the most notable result was a continuation of a surprisingly strong level of sales in Belgium. The Swedish market also showed further signs of having stabilised after the fall that it suffered last year. In general, other results were in line with recent performance.

Notes: 

• Austria, Denmark, Ireland, Luxembourg and Switzerland: estimates for latest month 
  
• Italy: latest month provisional estimate by Motorizzazione, previous months based on estimate of eventual revisions to Motorizzazione data. 
  
• Spain and Portugal: figures include sports utilities, which are reported separately from cars. 
  
• Netherlands, Germany estimated from data excluding final days of month. 
  
• UK: includes estimates for non-dealer sales. 
  
• The percent change in the final column compares the average selling rate in the year-to-date with the last full year. 
  
• The average of the seasonally adjusted selling rate for an entire year is by definition the total of sales in the year.