Summary




  • In a month in which economic news has been far from reassuring, car demand in Western Europe was strong. The SAAR (seasonally adjusted annualised rate of sales) improved to 14.9mn units/year in September, easily the highest this year, having been stable at 14.4mn in the two preceding months. The improvement in demand was spread over the majority of the national markets.
  • The year-on-year comparison of monthly sales showed a fall of only 0.5% in September. The number of selling days was the same (with Saturdays counted as selling day, which is our practice). The year-to-date total is now showing a fall of 3.6%.
  • The German market played an important part in the improvement in the selling rate. The German SAAR has been gradually rising since the start of the second quarter. This rise was maintained in September, while the flow of orders is also slowly improving.
  • Poor August sales had raised fears about the health of the French market. A reassuring result in September has allayed these fears. UK demand, which is a very large component of the September total, remained close to the 2.7mn units/year rate that has been seen for much of the past twelve months. Here, too, the signs of cooling that had been apparent in the summer months were absent in the vital September total – the downturn in private car demand is nevertheless a cause for concern.


September is a month in which the UK accounts for about one-third of West European car sales, roughly twice its share in the full year and although UK sales were down in September across the continent as a whole, the selling rate has quickened. Germany continued to improve; the UK market matched the strong SAAR of the last few months; the incentives made available in Italy are now having a marked impact on sales and, even more, on orders; and France recovered in September after a poor result in August.


As a result, the trend level of sales, which we define as a five-month moving average of the monthly SAAR, now points upwards, after having been on an uninterrupted downward path for the last eleven months. There are two reasons for this. The first is that sales in September were surprisingly strong: the 14.9mn selling rate was the highest this year. The second, and less important, reason is that the exceptionally poor result in April has now dropped out of the calculation of the five month average. The strong September result came at a time when most indicators of economic prospects – from equity prices to business and consumer sentiment – have turned increasingly negative. 


For total light vehicles, the cumulative year-on-year decline has shrunk to 3.7%, and the SAAR was 16.5mn units/month. Broadening the geographical definition to include the EU applicant countries brings the cumulative decline to 3.4%.


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.



The improvement that we have recently seen in German car demand continued in September. We expect an outcome of just under 260,000 units sold during the month, which would represent a selling rate of 3.3mn units/year. Although rather lower than the August selling rate, this is still a marked improvement on earlier months. Looking at the strategic picture behind the monthly fluctuations, it is becoming clear that German car demand reached a trough in the second quarter of this year, and has been gaining ground steadily since then. Not that the 3.3mn selling rate could be described as strong – but the direction of change is looking more encouraging than it has for some time. The relationship between the steadily deteriorating economic climate, and this gradual recovery in vehicle demand, is strikingly perverse. But so was the sharp deterioration in car sales in 2000, which saw the most rapid economic growth of any recent year. Final car sales figures for August, at 244,287 units sold, were a little lower than both our and the VDA and ACEA preliminary estimates of 248,000, but that small change in no way detracts from the strategic picture that we have described.


The UK market, in one of its peak selling months, behaved in exactly the same way that the previous month suggested. The selling rate remained at just under 2.7mn units/year, as it has done for the last three months. The negative comparison with the year-ago level is no great cause for concern, since last September was, of course, the strongest month since the new registration system began in 1999. What is of concern is the drop in private vehicle demand, which contracted by 11.3% year-on-year. After the unsurprising slump in August, fleet sales rose by 7.2% year-on-year, while business sales increased by 13 percentage points compared to September 2001. Looking at the whole year to date, the UK market now appears to be driven by business sales, which rose by 11% during the last 9 months. Diesel vehicles also remained in strong demand with a 43% year-on-year increase, taking UK diesel penetration beyond the 23% mark in September, and to 22.8% for the year to date.


The effect of the Italian incentive scheme was apparent in the September sales results, and, even more so, in the very strong order intake. The level of incoming orders in the three months since the incentives were introduced has been about 20% stronger than in the months immediately preceding their introduction (after taking out seasonal factors). The excess of nearly 190,000 new orders booked in September, compared to 165,000 sales, will support sales in the coming months. The press releases from manufacturers’ representatives express the hope that some other form of government incentive will be put in place when the current scheme expires at the end of the year, though there is no indication at present that the government is planning to do this.


September car sales in France, at 153,303, were virtually identical to the year-earlier figure. This came as a considerable relief, bearing in mind the alarmingly low volume of sales registered in August. It now seems clear that the underlying level of demand remains reasonably robust, though still tending to weaken gradually, just as it had been prior to the poor August result. Public interest may have been stimulated by the Paris show, and all the surrounding press coverage given to the industry.


The selling rate in Spain remained at 1.4mn units/year, exactly as it has in each of the last four months. Once again, this must be seen as a mildly positive outcome, in the sense that the trend has been strongly downwards for most of the last year. As we noted last month, any signs of stabilisation come as a pleasant surprise.


Sales in the Scandinavian countries (with the exception of Norway, which had a disappointing month) continued to rise fairly strongly. The Swedish result in particular confirmed the significant upswing that has been gaining momentum there throughout the last year.





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.
  • Germany: estimates based on information covering part of the latest 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.

Arthur Maher, Dagmar Gaede (amaher@lmc.co.uk, +44-1865-791737)
Oxford, October 4th 2002.