2000 ended on a strong note for the West European car industry. Demand recovered strongly from the weakness that had been seen during the two preceding months, with a seasonally adjusted selling rate for the month of a little over 15.5 mn cars/year. This brought total sales during the year to 14.94 mn units, a decline of just under 2% on the figure for 1999. (The figures to be published by Acea in a few days time may show a slightly lower number, and thus a slightly larger decline. The main reason for this is that they count only UK sales through dealers, omitting vehicles imported personally or by intermediaries). Total light vehicle sales (all vehicles under 6 tonnes gross vehicle weight) in Western Europe in 2000 will have been around 16.7 mn units, compared to the 17.4 mn sold in the USA. The strong result in December owed much to a particularly brisk level of sales to private buyers in the UK, as price cuts began to produce the desired effect.

Despite the improvement in December, it can be seen from the Diagram below that the trend level of total West European demand has been weakening slightly during the fifteen months since it reached a peak during the third quarter of 1999. Without making any forecasts for 2001, it can be seen that, if total sales this year are to match the 2000 total, it will be necessary for this downward trend to be reversed at the start of the year, and to continue upwards for the rest of the year at an upward slope that has the same angle as the downward slope in 2000 (or, of course, to be reversed later and slope upwards more steeply). It is too early to judge whether the encouraging December figure shows the start of this reversal. It is noteworthy that new emission regulations in 2001 may have induced manufacturers to seek to clear out any vehicles lacking Euro-III compliant engines before the close of 2000. However, it is not clear whether this contributed to the high registrations figure in December. It has certainly been a factor in Italy, but less so in other 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.

Final figures for November showed the German market still continuing in the trough in which it has remained since the start of 2000. The selling rate in November was 3.3 mn units/year, in line with, or slightly worse than, the results for the year as a whole. When final results for December emerge in the third week of January, we expect the full year total for Germany to come out at 3.38 mn units, a decline of 11%. Preliminary figures for December indicate that there has at last been some revival in sales in the final month of the year. We expect the December figure to come in at 245,000 units, which would translate into a seasonally adjusted annualised selling rate of 3.55 mn units/year. The comparison with December 1999 will still show a substantial decline, but it must be remembered that December 1999 was the last strong month before the industry fell into the trough where it has since remained. The selling rate in December 2000 still showed a substantial improvement over the two previous months. However, the incoming order data is still not showing a clear change in trend, so it may be premature to interpret the December figure as a definitive sign of the expected upturn.

December was always going to be a poor month for French car sales, since the model year now begins in January. Most of the 19% decline in demand, compared to December 1999, can therefore be put down merely to changed seasonality. January, by contrast, is clearly going to show a substantial year-on-year increase, whose exact extent will make it easier to interpret the December figure. On our reading of the new pattern of seasonal demand in France, the December result is consistent with those of the four months that preceded it, and shows demand running at an annualised rate of 2.0 mn units per year, well below the 2.23 mn average for the first seven months. The improvement in total West European demand in December did not get any contribution from France. The total figure for 2000 was slightly (less than 1%) lower than the previous year’s volume, as we indicated in our last report that it would be.

The figure of 107,803 sales through dealers in the UK showed a massive 27% increase on the previous year, with most of this gain coming from private as opposed to fleet buyers. It will be some while before we have an accurate figure for total UK sales, including new cars purchased by other methods, but we estimate that the annual total for 2000 will have been a few thousand units over 2.3 mn, making last year the second best year ever (after 1989). Although the price cuts have eroded a significant proportion of the rationale for personal imports, the delivery delays on these are substantial, and orders placed before domestic prices were cut will still be generating deliveries. Thanks to the very strong December figure, the disappointment of the poor peak selling month in September has now been fully compensated for, and the UK car distribution industry starts the New Year on a high note.

Though less dramatically than in the UK, sales in Italy also ended the year on a stronger note than the two preceding months, and the figure of just over 2.4 mn new sales in 2000 as a whole was an all-time record. Italian households have already seen in their pay-packets for December the results of cuts in direct taxes (many other West European households will have similar tax cuts in the next few months), and this may have been partly responsible for the good car sales volume. Consumer confidence in Italy also bounced back during December. However, there has been a rush to register non-Euro-III compliant engines in the final months of 2000, which may prejudice the volumes achieved during the early months of 2001.

A number of smaller countries made a contribution to the strong overall result in December. The Netherlands and Portugal were among these, though the Netherlands, like Ireland, is a country where December is always a relatively insignificant selling month. During the year as a whole, the volume of sales of countries other than the four discussed above was very close to the previous year’s level, but they too suffered from the downward trend that is apparent from the Diagram, and their sales volume during the final quarter was some 7% below the year-earlier level.

Oxford, January 8th 2001