As expected, the car markets of Europe began to stand still in December. Provisional
figures issued by Acea suggest that the market rose by just 0.3% to 956,082 from 953,153.
That was despite great effort by some manufacturers to get their numbers up a bit before
the year end by whatever means were at their disposal. The figures suggest that the year
finished 4.8% up at 15,065,196 from 14,369,480. That is a new all-time best for Europe,
and one that we do not expect to see challenged for a year or two yet.

We say that the figures ‘suggest’ because several of the countries are
estimated from 20 days actual sales and 10 days estimated. It has been seen on too many
occasions in the past – especially at year end – that those unknown 10 days can
make an enormous difference to the final results. The most notorious – and embarrassing –
occasion was back in 1988 when Fiat proudly declared to the world that they had won the
crown as top seller in Europe that year. But Volkswagen had registered something like
40,000 cars in the last two days of the year right across Europe and stole first place by
a handful of units. It is for that reason that WAIT stresses the need to wait for all of
the official figures to be released before handing out any final plaudits.

The table of results by country says that four countries finished the year down on
1998, whilst fourteen were ahead of year ago results. In December itself – as in
November – there were nine countries running behind the pace, and that is thought to
be more like the true picture. According to the official figures, the UK car market ended
the year some 2.2% down on 1998 at 2,197,615 from 2,247,403. That was a drop of 49,788
units in the year that the British Government changed the pattern of car sales in Britain
by allowing for two silly peaks instead of one completely stupid one. However, there are
those that know for certain that the true sales drop was much greater than the figures
tell us, and there are some who feel that the real drop was nearer 500,000 than 50,000.
The evidence seems to support the sceptics.

Germany finished on 3,787,679, some 1.4% up on the 3,735,987 of 1998. However, sales
were clearly tailing off towards the end of the year. The market was stimulated a little
by the need for Mercedes-Benz to put a good face on the sales of the Smart small car, and
by the race to the wire between the Volkswagen Golf and the GM Opel Astra. Again this is
likely to be a matter that will take some settling. The provisional results suggest that
Golf has won in Western Europe, but GM Opel is claiming that if the whole of Europe is
considered, then the result will be a different matter. Since 1982, the year we launched
the concept of a combined European market as opposed to disparate and separate markets, it
has always been considered that Europe comprised of seventeen markets, but ACEA has been
including Iceland for the past twelve months, so why stop there? What is important,
whatever the argument as to which countries to include, is that the data that is used can
be relied on. So far, with the exception of the normal seventeen, we have only been able
to obtain additional – and occasional at that – information for the Czech Republic,
Hungary and Poland.

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Italy is the second biggest market in Europe, and is still uncomfortably the most
important market for the Fiat Group, although they are striving to alter that position.
The Italian car market dipped by 1.2% in 1999, to 2,349,200 from 2,378,592, despite
something of a surge in December. Unless the Italian Government chooses to reinstate
scrappage incentives (as they have been encouraged to do by Fiat) then we expect the
market to continue to slide during the next two years, although not by a great deal. From
2.35 million in 1999 we expect sales to drop to 2.25 million in 2000 and 2.10 million in
2001.

The UK market dropped by 2.2% in 1999 to 2,197,615 from 2,247,403. That much was in
line with our predictions, but what happens next is anyone’s guess. In theory the
market should collapse in 2000, to no more than 1.8 million, but there is too much at
stake for that to be allowed. The real question to answer is, just how far will the
industry go to prop the market up? Having already kept the market well ahead of true
demand for at least the last two years, there will certainly be something of a downward
tumble this year, but probably not to any less than 1.9 million, and maybe not even that
far. If the market can be held at 1.9 million without too many fingers getting burned,
then we would expect more of the same in 2001, with true demand levels being allowed to
show in 2002, and not before.

France saw good growth in 1999, up 10.5% to 2,148,423 from 1,943,553. Our belief is
that the market will now settle gently to 2.08 million in 2000 and 2.01 million in 2001,
although the way that PSA and Renault have stirred up interest over the past few months
could cause a bit of a boost for a few months longer. Whatever, if 2000 ends up higher
than predicted, then 2001 will end up lower still.

Spain is a market that has been spurred by income tax changes, coupled with a natural
replacement cycle. Demand is genuinely high, resulting in an 18.1% gain to 1,408,070 from
1,192,530, but there are threats that fiscal policies could be tightened in 2000 and we
therefore expect to see the market drop to 1.38 million this year and further to 1.25
million in 2001.

The Dutch market caught everybody by surprise as the year ran out. The market had run
at all-time high levels throughout most of 1999 and a full year result of 624,000 was
predicted by WAIT. It was recognised that the market was running at unnatural levels and
that a downturn was imminent, but contacts close to the market seemed confident that the
momentum would last until the end of the year. In the end it didn’t and sales dipped
in November and then plunged by 23.4% in December to just 9,899 from 12,921, leaving the
year 12.7% up at 611,767 from 543,057. That makes our margin of error just over 2% and we
try to do better than that with a market like the Netherlands. Our current forecast for
2000 is to see sales drop to 549,000, and then to ease back in 2001 to 556,000. We see no
reason at this stage to change that view.

Belgium is seventh in order of importance in Europe in volume terms and finished the
year at a new record level of 489,621, following a strong 9.1% boost in December to 22,732
from 20,839. A review of the full year result was included in WAIT 262. We now expect the
market to return to something resembling normality with an expectation for 2000 of 460,000
and 440,000 for 2001.

Switzerland and Austria are very close in numerical terms. The Swiss market ended on a
high note, sales rising by 7.4% in December to 21,681 from 20,181. That took growth for
the year to 7.1% at 317,909 from 296,945, a fraction short of the 321,000 forecast figure.
We believe that the growth phase has not yet run its course in Switzerland and that sales
will continue to rise in the months ahead, to 338,000 in 2000, before easing back in 2001
to an expected 310,000.

Austria also continued growing throughout 1999. Sales rose by 2.1% in December to
13,344 from 13,067, taking the final figure to 315,112, a rise of 6.5% over the 295,865 of
1998 and not too far away from our forecast of 312,000. Austria is strangely volatile for
a mature market, but if the normal replacement cycle has its usual influence, then sales
in 2000 will dip to around 300,000 before rising smartly again in 2001 to 314,000. Should
the market stay strong in 2000, then we would still expect no more to be sold in total
over the two year period and so 2001 would therefore be expected to dip accordingly.

Sweden saw sales leap by 43.4% in December to 33,632 from 23,451. That smashed the
previous record for the month of 32,384, set back in 1988, the year that the market hit
its highest ever level. The result was something of a surprise in that the forecast had
seemed to be strong enough at 285,000, but the late surge saw year end sales finish at
16.5% up at 295,151 from 253,430. That is a margin of error of 3.5% and is outside of our
target range. Our forecast had suggested that 2000 would continue to 294,000 and 2001 to
300,000. It will take a couple of months to review the situation because we are not
convinced by the strength of the December result. There is talk in Sweden of tighter
monetary policies being adapted in 2000 and that may have resulted in car sales being
dragged forward over the closing weeks of the year. We will have to dig deeper to
determine where the market is now headed.

Portugal is another country where a late U-turn brought an unexpected full year result.
The forecast had been for 292,000 car sales in 1999, with a downturn predicted for the
following two years, after all, the sector normally averages under 240,000 sales a year.
As it happens the market went into reverse in November, then dropped by a sharp 28.9% in
December (if the ACEA estimates are accurate) and the market finished the year at 273,224,
some 10.0% ahead of 1998. Our current forecast for 2000 is 273,000, dropping to 248,000 in
2001, but that may now have to be revised for 2000 at least.

Greece saw fantastic growth, 45.3%, with sales jumping to 261,711 from 180,145. Much of
that was due to a considerable reduction in the registration tax for passenger cars in
1999, and interest rates were also lowered in order to stimulate the economy as the
country strives to meet the demands that will allow entry into the EU monetary union. The
market finished 10,000 units higher than we had expected, and so we expect that to be
shaved off the 2000 total, and would not be surprised to see the market dip to 250,000 in
2000. We will have to watch this market very closely. Our first thoughts are that 2001
will see sales of 268,000, but if the domestic economy is reined back, then there could be
just as severe a dive as there has been a meteoric rise.

Eire is due for a massive downturn. Sales rose incredibly throughout 1999, finishing
the year 19.6% up at 174,198 from 145,702. That compared with our forecast of 180,000,
affected considerably by the sudden 15.0% drop in sales in December to 2,002 from 2,355.
What we are endeavouring to discover is how many of those recorded sales were genuine.
There is speculation that up to 20% of the cars sold in 1999 were never intended for the
small Irish market but found themselves either in the north or even back in England,
especially the more upmarket brands. Our forecast currently stands at 153,000 for 2000 and
only 120,000 for 2001, but if the Irish Government starts to close some loopholes, then
the drop in 2000 could be even sharper.

Denmark saw car sales falling throughout 1999. Sales in December were 5.8% down on 1998
at 10,944 from 11,612, which was a softer landing than the full year deficit of 12.4%
might have indicated. The market finished at 142,343 from 162,495. Our forecast had been
140,000 with the expectation that sales would continue to drop, to 120,000 in 2000, and
then would inch back to 128,000 in 2001.

Finland also saw a very sharp downturn in December, sales dropping 27.0% to 5,930 from
8,124. That was much deeper than had been anticipated and it took the full year gain to
8.4% at 136,324 from 125,751. The forecast had been for a full year of 140,000, followed
by 145,000 in 2000 and 153,000 in 2001. The natural replacement cycle dictates that sales
should continue to rise strongly over the forecast period, although there are signs that
consumer spending is beginning to slow in Finland as the economy comes under a bit of
pressure. The market needs some measure of stability, but rarely gets it in Finland. In
1989 the market hit 176,771 and by 1993 it had dropped to just 55,836. Such volatility
makes it very difficult for the players in the field, and explains why there are less of
them in Finland than in most other European countries.

Norway finished well outside our margin of error. We had forecast a full year of
97,000, followed by 84,000 in 2000 and 91,000 in 2001. A late spurt at the end of the
year, including a 14.7% gain in December to 6,860 from 5,981, took the full year total to
101,114, a deficit of 14.3% from the 117,977 of 1998. December was only the second month
in 1999 that car sales had bettered year-ago levels, the other month being January. Thus
one aberration may be too little to read anything into. Manufacturing output is said to be
slowly increasing in Norway, but unemployment rates are also on the increase, but we hope
to have a clearer view over the next few weeks.

Luxembourg saw a new sales record established in 1999, although not quite as high as we
had predicted. Against our forecast of 41,000 the market finished the year at 40,412
(according to ACEA) which was 12.5% ahead of the 35,928 of 1998. The market actually
dipped in December, by 0.4% to 2,096 from 2,104, and we see the downward trend now
continuing, to 37,500 in 2000 and 32,000 in 2001.

Although the VW Group ruled the European car market throughout the 1990s, GM had taken
the top selling marque crown off Ford in 1992 and managed to hold on to it until 1998.
Volkswagen gained the smallest of leads in 1998, and the provisional figures suggest that
they hung on to that position in 1999, but so close is the margin once more that it would
be wise to wait for all of the official data to come in before such a claim can be made
with true authority. We do, however, believe that Volkswagen will again come out on top.

Volkswagen outperformed the market by selling 9.8% more in a sector ahead by 4.8%
overall. VW sold 1,729,636 from 1,575,276 to raise market share to 11.5% from 11.0%. With
SEAT and Škoda also easily outpacing the market and Audi only just falling short, the
VW Group strengthened its grip on the sector, lifting sales by 9.6% to 2,836,229 from
2,586, 687, and market share to 18.8% from 18.0%. We have driven a lot of VW Group
products in recent weeks and it is hard to find a weakness anywhere.

Another close run battle occurred between the Ford Group and the PSA Group. Peugeot
were the biggest individual winners in 1999, sales rising by over 160,000 units according
to ACEA, and that put the marque above Fiat. As a group, however, it closed the gap on
Ford Group to just a handful. The figures do not gel with others circulating in the
industry, especially those released by Jato Dynamics who show Peugeot as selling less in
December than in the previous year and Ford selling considerably more, whilst ACEA has the
results the other way around, once again underlining the difficulties that can be created
by the publication of estimated figures. For that reason, we will postpone the full detail
analysis until the true figures are available.