Summary 

  • After an alarmingly low April sales volume, the results for May provide confirmation of the declining trend in demand. But they also provide at least some reassurance that this decline is not as precipitate as the April figures seemed to suggest. The selling rate was 14.2 mn units/year, below the average for the year to date.
  • The UK market, which had been providing such crucial support from last September to last March, has continued its gradual return towards a more sustainable selling rate. The loss of this exceptional support has been one of the main reasons for the decline in total sales
  • Demand in France, which has been stable and solid for a sustained period, is beginning to show signs of a slight decline. Once again, the German results seem to have weakened sharply, after a promising start to the month. However, the Italian results for May also provided a little reassurance concerning the extent the decline. 

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We noted last month that the April figure may well have exaggerated the weakness of the market, because of problems of calendar adjustment. The results for May confirm that European car demand is not in free fall. But they also leave no doubt that it is decisively lower than last year. We estimate the seasonally adjusted selling rate for the month at 14.2 mn units. With five months of the year now in the bag, a pretty consistent picture is emerging. Year-to-date sales are down by 4%, and, bearing in mind that the selling rate increased in the second half of last year, this disparity is very likely to widen. The average selling rate for the year-to-date is down by 5.5% on last year's figure. Including light commercial vehicles increases the decline in the average selling rate to 5.8%. Adding in the EU applicant countries of Central Europe slightly reduces the extent of the decline, since sales have passed a trough in some of those countries. 

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. 

Although German sales have not yet been finally announced, the VDA's estimate of 284,000 is no doubt close to the mark. It is a substantially lower figure than had been expected, and must reflect a very poor finish to a month that, by all accounts, had started quite strongly. The 3.1 mn units/year selling rate is not much better than the dismal figures for March, and has kept the trend line moving downwards. However, there are some positive signs for the future. There is an uptick in the data on incoming orders, which is possibly too small and too recent to be taken as evidence of a turning point, but nevertheless is consistent with the tentative indications of improvement from other sources, such as the used vehicle market, that we noted last month.

The Italian results were modestly reassuring, coming after the very poor results of the immediately preceding months. The selling rate of 2.2 mn units/year is better than we have seen since February, and the year-on-year decline was also less steep than in the recent past. The order inflow is now tracking a fairly steady pace, which is certainly lower than in the recent past, but suggests that the selling rate will not decline steeply in the near future. The bank of unfilled orders also remains high. There have been hints of government intervention to promote car sales, in the effort to help alleviate Fiat's woes, though the more concrete suggestions have been limited to incentives for gas and electric powered vehicles, which is too small a subset to be of significance.

French sales are tending to drift slightly downwards, though they are still at a satisfactory level in any long-term perspective. The May result produced the lowest selling rate, at 2.1 mn units/year, of any month this year, as well as the steepest year-on-year fall. It may be that the looming Parliamentary elections are causing buyers to postpone decisions. Possibly the imminent renewal of Renault's Megane range is also causing buyers to hold off. Whatever the causes, there is no mistaking the result, which is a continued slide in the selling rate. An even steeper slide in incoming orders suggests that this slide has still some way to run.

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    The UK results were satisfactory, to say the least, but they do confirm that, after ascending to Everest-like peaks of demand at the start of this year, we are now edging our way down the other side of the mountain. The seasonally adjusted selling rate of 2.5 mn units/year shows that we are still at a high altitude, but it compares with the 2.7 mn units/year average of the period from September last year to March this year. It is once again the private buyers who have brought about this strength. Their sales rose by 13.4% year-on-year, while purchases by fleets and businesses were 2.2% lower. UK consumers, like those in the Eurozone, found that the threat of impending rises in interest rates failed to materialise in June, reducing the likelihood of sudden step changes in the pace of demand.

    The results for Spain, like those for Italy, were reassuring, after the very poor April figure. It is true that these results included a 7% year-on-year jump in sales to rental companies, so that the underlying level of consumer demand is weaker than the figures would suggest. ANFAC reports that sales to non-rental companies fell by 8.7%. Nevertheless, the overall selling rate during May approached 1.5 mn units/year, which is the strongest result since January. Averaging the April and May results probably gives a truer figure of the underlying level of sales, at 1.4 mn units/year.

    Among the smaller markets, there was a notable downturn in demand in Greece, and also in Belgium, where the reporting agency, FEBIAC, recently downgraded its forecasts of full-year sales. However, Sweden and Finland produced relatively strong results, as they have through much of this year, confirming that their automotive markets are in a recovery phase.

     

    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.  

    Charles Young (cyoung@lmc.co.uk, +44-1865-791737), Oxford, June 12th 2002.