Passenger car sales rose by 11.1% in June,
according to provisional sales results issued by Acea. The total reached was 1,348,585
from 1,213,576 and it has caused quite a bit of confusion. The June result took the
half-year total to 8,110,395 from 7,511,609, a rise of 8.0%. If the current rate of growth
is maintained, the full year total in Europe would be an incredible 15.45 million. The
all-time record is the 14.33 million of last year.

Country after country is reporting best
ever performances for the month or even the year to date, yet virtually no one is even
suggesting that the 15 million mark can be breached, let alone going on beyond that
figure. For last year’s level to be beaten, the market in the second half of 1999 can
sink by 2.0% and it will still be good enough. For the 15 million mark to be hit, sales in
the second half need rise by no more than 1% above the second half figures for last year.
So why is no one suggesting that the market will at least reach that figure?

The 15 million mark must be hit this year,
growth in recent months is far too great to be suddenly overturned without the industry
running into very serious difficulties. Some thirteen countries displayed double-digit
growth in June, and eleven have done the same for the whole six months, so a dramatic and
devastating downturn can be ruled out. But there is still enough happening to suggest that
the second half of 1999 will be much less exciting than the first half, not least is the
fact that Volkswagen has sharply cut back its build rates. In fact VW is now planning to
operate its production lines at the slowest rate that it can under its agreements with the
unions, which suggests that whilst the group has enjoyed unequalled success in the period
to date, the order books at least suggest that the current rates cannot be maintained.

In the markets in June, only Denmark and
Norway recorded losses and only Germany, Italy and France showed growth in single figures.
Italy is still behind for the six months to June, but only by 0.6% and Fiat has just this
week launched the all-new Punto, so there should be a marked change in Italy over the
coming months. The outgoing Punto may have been an award winner when it was launched, but
the industry has moved on so quickly since that launch that the outgoing Punto is now no
more than quite an ordinary car. Fiat has under-performed so much in recent history that
it has reached the stage where this new Punto just has to be a winner or the group will
find itself extremely vulnerable. Fiat will always dispute that kind of statement, which
doesn’t matter if they themselves know the true situation and are addressing the
problems. They have made such enormous strides with Alfa Romeo that we can assume that
they do truly know, and few would dispute just how professional Fiat can be, so we are
prepared to bet that the new Punto will in fact deliver the goods.

If Punto delivers, then the Italian market
will get an enormous boost over the coming months. If Punto fails, there will be no hiding
place. Italy needs a successful Fiat Group right now. Industrial output has not been
strong in the first half of the year and economists are forecasting a gloomy second half
to the year. But if the Punto creates the stir that Fiat are hoping for it could change
pessimism into optimism. It’s a bit like the effect that a football club can create
after winning a major cup. Fiat will have to hope that the omens are clearer than the
weather that greeted its long awaited 100 years birthday party, because Torino was awash
with rain rather than with the colours of a giant street party.

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Growth in Germany is much stronger than
most would have expected, and that may be one good reason why VW are being so circumspect.
Growth in the first quarter of the year was high because of an impending energy tax
increase. But demand outstripped supply and the order books became clogged and so sales
spilled over into the second quarter by a bigger margin than expected. So there could be
good reason to assume that the second half will see quite a change in the climate of the
market in Germany.

The United Kingdom market is impossible to
read with accuracy, influenced as it is by the change to the registrations pattern, and by
some of the most vigorous marketing ploys on the part of specific manufacturers. The UK
car buyer is slowly waking up to the fact that prices in the UK cannot be justified by any
argument (although many will try) and they are now learning that it is possible to barter
or bargain. Dealers all round know that they have plenty of slack to play with and can
offer seemingly juicy bargains and still make a handsome profit, and that is helping to
keep the market on the bubble. If you can offer a punter £2,000 off his next purchase,
that is an enormous incitement to buy, ignoring the fact that the vehicle could be bought
for £4,000 less a few miles away across the English Channel.

The VW Group is continuing to win more than
anyone else on the broad platform of the European market, yet there are the first signs of
cracks in some specific markets. In June the VW Group improved sales by 16.4% against the
11.1% market average, so no apparent cause for concern there, but in June itself both the
PSA and GM Groups achieved better percentage gains.

Ford is beginning to turn itself around
after a few troubled months. The Group is only 0.5% ahead at the six months stage and
their sales of 1,054,935 from 1,049, 523 means that there has been a full market share
loss at 13.0% from 14.0%, but growth in June itself was a better affair at 7.5% at 172,467
from 160,374.

PSA is on a roll. Sales for the six months
were up by 9.4% at 936,341 from 856,188, but in June itself the growth rate hit 20.7% at
153,380 from 127,047. Peugeot is being borne along on the demand that is being generated
for the sparkling little 206, whilst both Peugeot and Citroën are now benefiting from the
arrival of their latest diesel engines. The HDi range of common rail oil burners has put
PSA back at the top of the diesel brigade and they are riding the crest of the European
diesel sector wave, which can only swell further in the period immediately ahead.

Rover has not yet been able to show any
return from the new Rover 75, and a boost there is vital because BMW seems to have caught
the Rover bug and the group dipped by 7.6% in June to 74,990 from 81,175, taking YTD sales
down 2.6% at 420,557 from 431,745. BMW talks with conviction about prospects for both BMW
and Rover. There is still time to prove their optimism is well founded, but there
isn’t all that much time. The next few months will prove to be critical.