The car sales figures for September are beginning to show a distinct change from what we have been seeing in the earlier part of this year. They indicate that the German market is showing greater strength, confirming the hints of a recovery which we had noted in our commentary on the August figures. At the same time, the figures for some of the countries that had been showing greater dynamism earlier this year are now coming in rather weaker. In short, the relative importance of the various countries in Western Europe is returning to normal, after a period in which Germany had been accounting for an unusually low percentage of total sales. The figures also show a continuation of a total West European market that is fairly stable, at a selling rate of 15 mn units/year, but for the present on a slightly declining trend. As always, this picture is complicated by a number of distorting factors, which are discussed below.

Although there is no doubt that there has been a substantial improvement in the selling rate in Germany in September, the exact extent of the improvement is still a little unclear. Current indications are that sales during the month ran at an annualised rate of at least 3.65 mn units/year, which compares with the previous month's annualised selling rate of 3.6 mn (the final figures were a little stronger than our initial estimate last month of 3.5 mn) and with the average of just 3.38 mn for the first eight months of the year. In other words, there has been a substantial improvement in the monthly selling rate since the low-point in summer, even though the comparison with the same month of the previous year will still be negative. We would interpret this improvement as an expected return to normality, after six months of exceptional weakness. As readers of our article ("Are West Europeans Falling Out of Love with Cars?") published in www.just-auto.com will be aware, Germans spending on car purchase was abnormally low in the second quarter, despite an upturn in consumer spending in general.

The French market is going in the opposite direction -or so it seems. Changing seasonality makes it hard to be dogmatic. Some would attribute the September car sales volume of less than 150,000 units as nothing more than evidence that buyers are holding off until January, now that the model year coincides with the calendar year. We think that is a rather optimistic interpretation, and judge the seasonally adjusted annualised selling rate in both August and September at just over 2 mn units/year, a substantial decline on the 2.2 mn average for the year to date. The inflow of new orders appears to have been falling back sharply. Again, seasonal patterns may have been changing, but our interpretation is that, after a long period in which the incoming order inflow had been in excess of monthly deliveries, this has now changed, and the backlog of orders is now falling.

The UK figure fell somewhat short of the official industry forecast, but was very much in line with the pattern of sales in the year so far, quite undisturbed by any effect of the new regulations brought in at the start of the month. We interpret the figure, including an allowance for imports not counted in the SMMT figures, as representing an annualised selling rate of 2.25 mn units, exactly the same as the average for the earlier months of the year. The effect on consumers of lower new-car prices has to be offset against any negative impact on fleet demand, now that dealers must be offered the same terms as fleets (though this is unlikely to have a short term impact, since fleet contracts are medium-term). It must also be offset against any reduction in pre-registering. However, despite the provisions in the new regulations to end incentives to dealers to pre-register, there appears to have been fairly intense end-month activity, which in the past was often considered a symptom of pre-registering by dealers and/or manufacturers.

The Italian market showed remarkable strength during September. The 185,000 cars sold translates into an annualised selling rate of just under 2.7 mn units/year, well up on the average of 2.4 mn for the first eight months. This increase appears to correspond to a much higher degree of incentivisation (discounting) by manufacturers. This in turn, it has been suggested, may reflect considerable stocks of vehicles equipped with engines that do not meet Euro-III norms. The sale of such vehicles is in general not permitted after the start of next year, though some stocks can be carried forward. It has also been suggested that freer supplies of diesels may have helped towards the higher figure. To the extent that the first explanation is valid, there could be a price to pay after next year, and in that sense the Italian figure might be interpreted as less strong than it seems.

Some of the smaller countries, which have contributed so much to the strength of demand in the early part of the year, are now showing signs of having reached a peak. Spain and Holland, the two largest markets after those discussed above, fall into this category. The factors discussed in the context of Italy may also be a factor in some other markets -certainly improved supply of diesels will have helped towards the improvement in Germany. As the Diagram shows, the outcome for the full year's West European sales can now be bracketed within a very small margin on either side of 15 mn units.