The new car market in Europe held up in March, but a strong Italy played a big role and without that the market situation would have looked a lot worse. The underlying temperature of European demand during March appears to have been close to the previous month, and not far from the one before that. The selling rate came in at 14.1 mn units/year. If the selling rate in Italy had been closer to its trend level, that would have pulled the SAAR for Western Europe as a whole down to an alarming 13.7 mn units/year.
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Summary
- The results for 2003 to date show a high degree of consistency. The underlying temperature of European demand during March appears to have been close to the previous month, and not far from the one before that. The selling rate came in at 14.1 mn units/year.
- However, the outcome in March would have been substantially worse, had it not been for another bumper crop of sales in Italy, as another incentive scheme drew to a close. If the selling rate in Italy had been closer to its trend level, that would have pulled the SAAR for Western Europe as a whole down to an alarming 13.7 mn units/year.
- The UK market continued to provide solid support, in a month which is seasonally strong, and in which the UK is an important component of total sales. Here, too, the selling rate was in line with what had been seen in the two previous months. However, German sales were very disappointing, and the French market is continuing to slide.
In interpreting the March sales numbers, it is important to bear in mind that Good Friday fell in March last year. It is a public holiday in most, but not all countries in the region, but even in those where it is not a holiday, it provides an opportunity to take a long weekend in advance of the coming holiday. Accurately accounting for these calendar variations is difficult, but it is quite clear that it would be a mistake to take the variation compared to the previous March at face value. Our assessment is that the result translates into a SAAR (seasonally adjusted annualised selling rate) of 14.1 mn units/year, compared to last March’s 14.5 mn.
Two other points must also be borne in mind in making the year-on-year comparison. One is that in March and September, the UK accounts for about a quarter of regional sales – a higher proportion than in any other months. Therefore the total outcome is boosted by the continuing strength of that market. (Focusing on the SAAR gets rid of this distortion). The other point (which even the SAAR cannot adjust for) is the distorting effect of the ending of the Italian incentives, which will have pulled forward sales from subsequent months. If we replace the Italian SAAR with a more representative number, then the year-on-year growth of 2% which we are seeing in the raw numbers could turn into a decline of 6 or 7% when all the distortions are removed.
The cumulative decline of 2.4% for the first quarter as a whole is identical for total light vehicles (including light commercial vehicles) as for cars. If we expand the horizon to include all countries applying to join the EU (including Turkey) then the decline is more modest, at about 1.5%. However, there is some uncertainty about this figure, as our March figure for Turkey is still an estimate, and sales may have been particularly vulnerable to the impact of the war.
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By GlobalDataThe 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 month had an identical number of Saturdays and Sundays as last year – further calendar effects were discussed above.
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We expect German sales to come in at 321,000 units. Even though this would be little different from the year-earlier number, there is no disguising the fact that this is a disappointing result. If confirmed, it would represent a dip in the selling rate below 3 mn units/year, and would be the lowest SAAR since 1994. There have been some mildly encouraging reports concerning the order inflow, but these are not translating into any improvements in registrations volumes. The final count for February came in at 230,417, a SAAR of 3.1 mn units/year. Consumer confidence weakened in March, though there has only been a small deterioration since the end of last year, and recent disappointing unemployment figures will have done nothing to dispel the gloom.
The new registration plate in the UK brought the expected crop of sales. Total dealer sales came in at 438,000 units, meaning that, with allowance for a declining number of non-dealer sales, the selling rate came in at 2.55 mn units/year. These sales comprised a particularly strong outcome for fleet sales, and some will view this as a sign that the market has been artificially “forced” by manufacturers. However, it is noteworthy that commercial vehicle sales also had a strong month. A selling rate of 2.55 mn is still a remarkably healthy number, though consistent with the gradually declining trend that we saw in the two previous months, and, with allowance for the extra selling days, lower than last March on a calendar-adjusted basis. Consumer confidence weakened a little, but is still above last year’s lows. Other forms of retail sales seem to have begun to slide in advance of April’s tax increase, but these figures show that the auto market is still holding up well.
For the second time in four months, an Italian government incentive scheme has come to an end, bringing a bumper crop of sales in its final period before expiry. It had been expected that an extension to the scheme might be announced before it expired. Industry Minister Marzano has said that he is favourable to another scheme, and of course industry bodies are also urging one, but nothing concrete has yet been announced. Meanwhile car buyers will now be alert to the fate of those who lost money by purchasing in early January, after one scheme had ended and before the next had begun. Incoming orders were reasonably strong in March, but the stock of outstanding orders is beginning to erode.
The 187,184 cars sold in France in March translate into a selling rate of just over 2 mn units/year, which is exactly the same as in February, and a little worse than in January. The trend in the selling rate has been declining at the same gradient for nearly two years, and nothing in these results suggest any change to that trend. An article in Le Figaro has suggested that even the relatively poor level of sales in March was supported by exceptional levels of manufacturer incentives. Consumer confidence has taken a more severe beating in France than in any other major European economy, and is now at levels worse than any seen for more than six years.
March brought another unpleasant surprise to Spanish vehicle sellers. The selling rate declined to just 1.2 mn units/year, emphasising the steady and steep drop in the underlying level of demand since the middle of last year. Some comfort can be taken from the fact that the decline was less steep in sales to businesses and individuals than in sales to rental companies. Although the decline in consumer confidence has been less precipitate than in France, it has nevertheless been falling consistently for several months, and is now lower than it has been since 1993.
The selling rate in the Netherlands is still clearly in sharp decline, after December’s tax-induced binge. Still larger declines have occurred in Greece and Portugal. Strong demand in Finland and Sweden provides the one piece of good news among the smaller countries.
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