The temperature of the European car market dropped back in August. After two months of brisk demand in June and July, the seasonally adjusted annualised rate of sales fell back to 14.1 mn units/year, close to its average for the year to date. Sales during the month were about 6% lower than last August, much of which can be accounted for by the fact that there was an extra Sunday in the month. Cumulative sales for the year to date are down 2.6% for West European cars, and 1.8% for all light vehicles in all countries in the region, including the EU applicant countries and Turkey.
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“The results might have been closer to the encouraging June and July figures, had it not been for exceptionally low French sales”, commented Charles Young, of J.D. Power-LMC. “UK consumers continued to buy vigorously, and the evidence of an improvement in German demand is becoming more solid each month”.
Summary
- August is a volatile month, as well as one which normally accounts for only about half as many sales as the average month. Results for this August, on a seasonally adjusted basis, have been in line with the results for the rest of the year, with a selling rate of some 14.1 mn units/year. This was a worse outcome than in the two previous months
- The French market was again the weakest of the major markets, and contributed disproportionately to the poor outcome for Europe as a whole. Temporary factors may have contributed considerably to this result, though the broad picture that it paints is consistent with previous months this year.
- Germany continued its gradual recovery from a long period of low sales. While the order backlog is still thin, the order intake has quickened, and suggests the improvement is sustainable. Italian sales were low, as was likely following the unexpectedly good result in July. Order books in Italy offer little early hope of an upturn. The UK outcome was strong for what is always a relatively insignificant month.
- Most of the smaller countries produced slightly weaker results than expected. The preference for taking delivery of new cars in July, before the summer holidays, may be growing.
Interpreting August results is a statistician’s nightmare, but however one analyses the numbers available, they clearly show greater weakness than the two preceding months. In part, this can be put down to calendar factors: August 2003 had five Sundays, August 2002 only four. This is taken account of in calculating the SAAR at 14.1 mn units/year. The oppressive heat wave that afflicted much of Europe may also have depressed sales. Overall, the selling rate in August was very close to the average for the first five months of the year. This could be taken as suggesting that the improvement seen in June and July may have been a mere blip. However, when one takes France out of the numbers, the remaining countries produced results that are more in line with the two preceding months. A more optimistic interpretation would be that, in general, demand remains stronger than it was in the first five months, but that a series of temporary one-off factors was responsible for the exceptionally low sales volume in France.
The indications for Germany are consistent with the steady improvement that we have seen in the last quarter or more. A further boost could come from the inflow of new orders associated with this month’s Frankfurt show. Private demand is clearly holding up well in the UK, though there always has to be uncertainty about whether strong sales in August mean that the pull of the new number-plate has been reduced – that is, that September may be lower. The volumes from Italy in Spain were in line with the selling rates in the immediately preceding months.
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By GlobalDataWhen wider Europe is considered, encompassing Western and Central European car markets, year-to-date figures are down by around 1.8% both for cars and for all light vehicles under 6 tonnes gvw, including commercial vehicles. The selling rate for this wider definition – pan-Europe, all light vehicles – was 16.8 mn units/year in August, slightly lower than the average for the year to date, and compares with last year’s 17.3 mn out-turn for the full year.
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 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. As noted, the SAAR takes account of the fact that there was one fewer selling day this August.
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German sales in August are expected to be around 236,000 units, though as always there can be surprises in the numbers before they are finalised. This would be consistent with the 3.3 mn selling rate of the last few months, and confirms the upturn in the market. The stock of outstanding orders is still at a relatively low level, and there have been reports that the inflow of new orders just before the Frankfurt show was low, as buyers were waiting for the new models that will be presented at the show. However, if this turns out to be true, it will not cancel the underlying trend for an improvement in the order inflow which is clear from the data for the preceding months. The show itself should produce a good crop of new orders, and play its part in consolidating the gradual improvement in German vehicle demand.
The UK produced what is for August another very good number. We believe that the comparison with the previous year is tricky, because non-dealer sales are likely to have been higher at that time – we now treat them as negligible – but this is certainly a strong result. While buyers in the rest of Europe seem increasingly disinclined to buy in August, those in the UK appear more willing to do so. This probably reflects the continuing strength of consumer demand, and willingness to keep adding to household debt. There is some possibility that it could also reflect a diminished willingness to wait for the new plate in September. August still pales into insignificance compared to the September outcome. Expectations for September may recently have been reduced: an SMMT press release on September 1st forecast that “over 440,000 cars will be registered this month”, while, in commenting on the August numbers three days later, the SMMT said that “volumes this year are expected to be an a par with, if not a shade below” last year’s 433,000 level.
Italy’s 90,100 registrations in August are in line with the 2.1 mn selling rate of the previous two months, and of course better than the 1.9 mn selling rate of the two months that immediately followed the ending of incentives in March. However, the reaction of ANFIA, representing manufacturers, and UNRAE, representing importers, has been to stress the weakness of this result, and to call once again for state intervention to boost the market. Certainly the data on new orders in August (roughly equal in number to the new registrations) was not encouraging. We estimate that the backlog of unfilled orders is now at a five-year low, though it could be boosted by the launch of the new Panda.
This year brought fewer August car sales in France than for at least twenty years. Of course, seasonal patterns have changed in the last few years, but this was still an unexpectedly low number, producing a SAAR on our calculation of 1.6 mn units/year. It is well known that the French had other things on their minds last month, such as the ferocious heat and the related surge in the death rate. Le Figaro has suggested that the low share of French marques in August was due to fleet orders not having been dealt with during the holiday period (presumably, to an even greater extent than normal). Expectations, both of new models, and of keener pricing, may also have played a part in this low outcome.
The results for Spain, as for most other countries in Western Europe, represented a retreat from the selling rate seen in the two previous months. They were, though, much better than the results seen in the opening months of this year, and therefore provide further evidence that this market has passed its trough. All of the year-on-year decline can be put down to the lower number of working days. In addition, the share of rental sales in August retreated to a more normal level. The Prever government incentive plan comes to an end at the end of the year, which may of course lead to further turbulence in future.
Among the minor countries, Finland once again produced a remarkably strong result, Ireland a remarkably weak one. The decline in Portugal now seems to have bottomed out. For the second month running, Belgian sales were surprisingly strong.
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