After slow sales in the summer months, September new car sales in Western Europe bounced back with a seasonally adjusted annualised rate (SAAR) of 14.9 million units (which compares with a SAAR of just 13.7 million units in August). But is the robust result indicative of real recovery taking hold or the actions of carmakers looking to hit end of quarter sales targets? This analysis is from JD-Power-LMC.


  • Sales bounced back robustly in September after a poor period in the months of July and August: the seasonally adjusted annualised rate of sales topped 14.9 mn units/year. This marks one of the best results in the year to date.

  • We saw revival in some of the formerly weak markets of France, Germany and Italy – the market Spain remained solid and at a high level.

  • The UK market continues to show signals of a moderate cooling as interest rate hikes take their toll on demand.

The selling rate of over 14.9 mn units/year marginally beats the previous best in 2004 (June). It could be argued that the market is finally showing some signs of recovery or it could be that September, an end-of-quarter month when targets need to be met, saw some efforts to boost sales from the car manufacturers themselves: in fact, we think it was probably a little of both. The small year-on-year fall in sales is therefore not a good way of assessing the importance of the September result – in the context of how strong the market was in September relative to the recent past the outcome must be viewed as positive. The outlook for 2004 as a whole remains marginally positive though sales will struggle to grow by even 1%.

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The chart 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 September, compared with 2003.

The German market enjoyed a solid result in September: the 3.37 mn units/year selling rate was the best in 2004 so far. Consumer confidence has stabilised at a relatively low level, after falling for some time, and even edged slightly upwards in September, but there has been no major change in consumer sentiment that can be expected to lead to a sustained recovery in sales in the short term. Sales in full-year 2004 look likely to be down by between 1% and 2% with the outlook for 2005, while better than this year, offering hope of only a small increase.

The UK market continues to slowly come off the boil after its recent spell of record strength. The selling rate remains healthy with only a slight reduction on that which predominated in 2003 for instance. The composition of sales in September was skewed away from the private buyer, for whom sales fell by 6% year on year; fleet buyers have taken up the slack. Private sales are no doubt responding to rises in interest rates which have been instituted by the Bank of England. Sales in 2004 will be scarcely different from 2003 though we expect that the market decline may become somewhat more entrenched in 2005.
The French market bounced back in September after a period of profound weakness in July and August. As with some other markets the result marked the best yet in 2004 on a seasonally adjusted annualised basis – the selling rate nudged towards 2.2 mn units/year. A 2 mn market still looks likely for this year but we are optimistic that 100,000 units or more might be added to sales in 2005.

In Italy, the market showed some improvement from recent weakness. Incoming orders indicate that we can expect some short-term continuation of the current level of demand, though a full-year decline is now all but inevitable for 2004 – the final quarter of 2003 was strong and will prove difficult to repeat this year. For 2005 the outlook is mildly positive – we suggest a 2% increase in car sales.

The Spanish market looks certain to achieve record sales in 2004 with January-September year-on-year growth of 12% already in the bank – only a catastrophe could now change this. While the underlying fundamentals are likely to remain solid in 2005 (consumer spending growth, for example, looks likely to remain on a par with this year) we think that growth from such a high base will prove hard to achieve. A small decline is anticipated.

Among the smaller countries the Greek market has made the largest contribution to overall growth in sales volumes in 2004 – in fact only Spain has made a larger one. Dutch demand continues to suffer badly.

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