According to market analyst JD Power-LMC, there was evidence of an incentives-based boost to European car sales in September as the third quarter closed. But an improved sales trend in four of the five largest national markets of the region in September was seen by many as welcome news. The UK market, however, was notably sluggish in the face of gathering gloom over prospects for the economy. This analysis is from JD Power-LMC.


  • The seasonally adjusted annualised selling rate climbed higher in September to 15.4mn units/year, following two relatively weak months preceding it.
  • The French market put in its best selling rate so far this year, following two pretty disappointing months. Germany and Italy posted better results, and the trajectory of the Spanish car market continued upwards.
  • A key month for the UK, September proved lacklustre, reinforcing this market’s generally weaker performance this year.

The use of incentives in the final month of the third quarter of the year was again in evidence in Western Europe. A selling rate of 15.4mn units/year unsurprisingly proved the best on the last three months (July registering a rate of just 14.0mn units/year while August managed a slightly better 14.3mn units/year). Of the five largest markets in the region, all but one managed an improvement, the outlier being the UK. The UK is certainly struggling this year and is expected to be a key factor in holding sales growth in the region back. Italy is also expected to come in lower for 2005, but with the help of gains in Germany and France, as well as another record year in Spain, the Western European market should come in at, or a little ahead of, the level achieved in 2004 – incentives will again play their part to help achieve this result.
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. There were the same number of selling days in September, compared with 2004.

West European Car Sales

click table to enlarge

Car registrations in Germany were stronger in September, the selling rate standing at 3.49mn units/year – this compares to an average selling rate for the first eight months of a more modest 3.25mn units/year. Consumer confidence has been edging higher in recent months and with another year-end push expected, we are now looking to the market closing out at around 3.4mn units for the full year. Like many others, we had been anticipating a Christian Democrat victory in the recent election, and with the CDU manifesto pointing to a VAT increase in January 2006, we forecast a pull forward on sales before 2005 drew to a close (with slacker sales naturally coming in early 2006). While we retain this assumption for now, with negotiations for a grand coalition underway, there are clearly some risks to any major policy items on the agenda.

One of the two most important months for car registrations in the UK, September’s result reinforced the weakness of the market compared with last year. While all other major European markets registered a better September result than in July or August, the UK’s selling rate of 2.47mn units/year came in below that of the preceding couple of months. A backdrop of weaker consumer demand and slowing economic growth help explain the current market performance, and even if incentives are again used to boost sales towards the end of the year, the outturn for 2005 will fall some way short of 2004. We anticipate the September selling rate provides a good indication of the outturn for the full year, with a further fall expected in 2006.
With a selling rate of 1.72mn units/year last month, the Spanish market continues to be a strong performer. The September result is only bettered so far this year by the rates achieved in January and March, and the latest month lifts the average rate year-to-date to 1.67mn units/year. Both private and rental sales were up year-on-year last month (private sales providing the main contribution in a traditionally weak rental sales month) as well as year-to-date. A strongly performing economy continues to help the Spanish car market and we reiterate our expectation of a full year market expansion of 1-2%, with some easing in 2006 as underlying demand drivers ease back.

Having proved fairly gloomy most of the year, the market outturn for the most recent full month in Italy made for better reading. The selling rate of 2.41mn units/year was considerably higher than the 2.18mn units/year averaged over the first eight months, with the September result only bettered by that of June so far in 2005. As with March and June, the result for the final month of the third quarter of the year pointed to the use of incentives to help give the market a boost and achieve sales targets. Incoming orders indicate some further improvement as we head to the end of the year although the market will still fall short of the 2004 level.

Following a decidedly weak couple of months in July and August, it was no surprise that the last month of the third quarter would register a notable improvement in France. In fact, the implied selling rate of 2.35mn units/year in September was the best so far this year, beating the incentive-boosted months of March and June. This brings the average selling rate for the year up to 2.08mn units/year, and although H2 is looking likely to be weaker than H1, 2005 is shaping up to be a much better year than 2004. 2006 should see a further improvement in the car market helped by income tax cuts.
The Swedish market put in a good year-on-year performance last month, as did Belgium. Year-to-date, Greece and the Netherlands stand out as poorer performing smaller markets.

click table to enlarge