In Western Europe, a selling rate of just 13.7mn units/year for the month of August was very similar to the rate achieved for July, and some way down on the average of 14.3mn units/year so far this year. While economic conditions make modest improvements, a lack of progress in domestic demand, particularly in Germany, naturally hinders the recovery of the car market.

Summary

  • Following more promising results earlier in the year, August followed in the footsteps of July with a comparatively poor performance. As in July, the seasonally adjusted annualised running rate (SAAR) for August stood at 13.7mn units/year, well down on the average year-to-date (14.3mn units/year).
  • The August result in France was up on a year ago, although the year-to-date declines continue to weigh heavily on the region's sales. German sales remain in the doldrums.
  • The selling rate of Spain moved back above 1.5mn units/year, while in Italy the selling rate fell below the 2mn units/year mark
  • In the month before new registration plates are again introduced, UK market sales implied a solid selling rate, although the August result was a little down in year-on-year terms.

In Western Europe, a selling rate of just 13.7mn units/year for the month of August was very similar to the rate achieved for July, and some way down on the average of 14.3mn units/year so far this year. While economic conditions make modest improvements, a lack of progress in domestic demand, particularly in Germany, naturally hinders the recovery of the car market. It must, of course, be noted that August is the weakest month in the year for car sales and so one should not read too much into the results. Something of a rebound in the selling rate is expected over the next few months; the UK and Spain will remain strong, while the August SAAR for France is seen as a statistical aberration. For 2004, we are therefore forecasting car sales to outturn at 14.3mn units/year (-60k), with 2005 providing some relief to European OEMs.

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 five-month 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. There was the same number of selling days this August, compared with 2003.

West European Car Sales
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Registrations in Germany continue to struggle, with the likelihood that 2004 will fail to match the rather weak results of 2003 further increasing. While the overall economy grows thanks to net trade results, consumer spending fails to make a notable improvement, and consumer confidence remains weak. For the full year, even reaching a market total of 3.2mn units may be a little optimistic. The ongoing weakness in key drivers also raises some concerns regarding the market next year.

In the UK, the selling rate for August stood at 2.66mn units/year. Interest rate rises over recent months played a role in the fall in private sales, and although company car buying remained strong, it was not enough to offset the private buyer declines, with a resulting fall in total sales, year-on-year. August is now typically a weak month in the UK, and, with new registration plates, the September results have a much greater bearing. Our current view is that full-year sales will be similar to those of 2003.

Another disappointing month for Italian car sales meant that the implied selling rate fell under the 2mn units/year mark. In fact, the August result was the lowest since 1996. Incoming orders have been low for a while and so the most recent month's registrations performance comes as no real surprise. With order intake being fairly balanced so far this year, the implication is that registrations are set to remain at relatively low levels in the coming months.

Despite some promising signs in May and June, the French market has been disappointing in the more recent months. August's performance proved to be abysmal in SAAR terms, only managing 1.65mn units/year. A backdrop of relatively weak consumer confidence may explain part of the story, although August is always a weak month in France and so statistically less important. Comparatively, the selling rate in August of last year was also relatively weak, with the possible implication that the seasonality effects in the French market are changing. We do not expect any increase in sales this year over last, but do anticipate that the selling rate will bounce back in the near future.

After signs that the market was easing in Spain in July, the selling rate was again pushed over 1.5mn units/year for August. Rental sales suffered another year-on-year fall, while private and business sales continued to strengthen. An August selling rate of 1.53mn units/year reinforces our belief that 2004 will be a record year for the Spanish market.

Of the smaller countries, Denmark and Norway again made positive contributions, year-on-year, in August. Belgium and Greece did well for the month, and continue to add on a year-to-date basis. Finland's sales were relatively poor, moving it into negative territory in year-to-date terms.

Click here to enlarge the image