European car sales holding up

Many of the economic statistics coming out of Western Europe in the last month show clear signs of recession. No such signs are yet to be found in the car sales data — though some could be found in the incoming order data. The selling rate was 15.4 mn units/year for cars, and 17.0 mn units/year for all light vehicles, the second-best for this year, and well above the average of recent months. The improvement in the trend rate that we have seen since mid-year, when tax cuts and declining fuel prices began to swell purchasing power, has been maintained. As the chart shows, year-on-year comparisons are now with a rather weak period at the end of 2000, pre-tax-cuts and pre-oil-price declines. Thanks to this declining trend last year, the year-on-year comparisons for recent months have turned positive, and the cumulative totals for the year to date are now also fractionally ahead of last year.

“..November will have produced one of the highest selling rates this year in Germany, while Italy and France have both held up well.”

The exuberant UK consumer continues to make a major contribution towards this strength, but November will have produced one of the highest selling rates this year in Germany, while Italy and France have both held up well. A less positive trend in light commercial vehicle sales, which are down by 1.6% in the year-to-date, means that total light vehicle sales in Western Europe are just 0.1% ahead of the year-earlier level, on course for very much the same 16.7 mn total that was seen last year. However, broadening the geographical horizon to include the countries applying to join the EU, we still have a decline of some 2.3% for the year-to-date in all light vehicle sales.

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. The most recent numbers underlying this chart are appended in the table at the end of this note. 

We expect German car sales of 275,000 units in November, and with some days still to be counted, the figure could yet be higher. The SAAR in November will have been close to 3.6 mn units/year. This is one of the strongest results in 2001, and confirms the slow but steady upward trend in the selling rate from the 3.3 mn units/year trend that prevailed at the start of 2001. For the last three months, the SAAR has averaged 3.4 mn units/year. October’s figure came in at 284,317, higher than our preliminary estimates (and also than those published by the VDA and ACEA). That is the good news. The bad news is that in both of the last two months, the level of incoming orders has given cause for concern, and prompted downward revisions of expectations for future months. Clearly it is not possible for the flow of sales to exceed the flow of incoming orders for an indefinite period. However, a reduction in average waiting times, which could be due either to speedier build-to-order, or to a rise in the number of buyers willing to purchase straight from the dealer’s forecourt, could reduce the average level of the “bank” of outstanding orders, and, for as long as this process continues, some imbalance between the two would be sustainable.

The Italian market remained strong and stable. The November sales of 183,100 units translates to a 2.5 mn units/year selling rate, slightly higher than the average for recent months. Taken at face value, the level of incoming orders, at 205,907, also looks extremely reassuring. It allows the order bank to be built back up to a level some 15% higher than it was at the same time of last year, justifying expectations of continuing strong registrations in coming months. However, it must be borne in mind that this will include the build-up of what will probably be a substantial order bank for the Fiat Stilo. The launch of this very important model will have given a one-off boost to incoming orders which will have distorted the total.

“There continues to be considerable concern about the high level of incentives needed to achieve the recent level of sales..”

There continues to be considerable concern about the high level of incentives needed to achieve the recent level of sales, and the press releases from both ANFIA, representing manufacturers, and UNRAE, representing sellers of imported vehicles, show that the industry is expecting a decline in 2002. The Table below makes it clear that, unless December produces a big surprise, we are headed for 2.43 mn this year, little different from the previous year’s figure. UNRAE has indicated that it expects 2.27 mn units in 2002, while ANFIA speaks of a figure “of the order of 2.2 mn units”.

French car sales translate into a 2.26 mn selling rate for November, very close in line with the average for the year to date. Separating the underlying trend in French demand from the seasonal factors remains a perilous enterprise — the changes in the model year are still too recent to be dogmatic. But the way we read the data is that the selling rate is now on its way back down from a peak that was reached in the middle of the year. Both the sales and the order data suggest that this is, so far, a modest rather than a precipitous decline.

“The enormous strength of private sales continues to buoy up UK sales. “

The enormous strength of private sales continues to buoy up UK sales. The 13% rise in total dealer sales in November includes a 25% increase in the sales by private buyers. It adds up to a selling rate comparable to September’s phenomenal 2.7 mn units/year, when allowance for non-dealer sales is made. The UK selling rate has been scaling a mountain peak since the middle of 1999. This current level is surely the summit. It confirms the UK as the second-largest market in Europe, even if non-dealer sales are ignored. Falling interest rates, interacting with a property market that is still showing only tentative signs of having passed its peak, and increasing affordability of vehicles, have created a uniquely favourable climate for vehicle sales. Fleet and business sales are also making a small contribution to this growth, showing a 4% rise in November, though the overwhelming majority of the gains have been coming from the private buyer, who has been responsible for almost 50% of sales in the year-to-date, compared with 45% in the previous year.

The result from Spain was closely in line with expectations, and confirms the picture of a market that is coming off its peak, which was reached in Spring and early Summer, when the effects of the revised PREVER incentives plan were at their strongest. However, the year-on-year comparisons remain positive, since the selling rate dipped sharply towards the end of 2000. Recent information from Spain suggests that the PREVER scheme may now be made permanent — earlier expectations had been that it would end at the close of 2002. ANFAC indicates that there was a substantial decline in sales to rental companies during November, while other sources of demand accounted for the year-on-year increase.

Among the smaller countries, the main change has been a rather poor outcome for Portugal, and a slight deterioration of trend in Greece. Other countries that have reported have been close to what had been expected.

Notes:

• Austria, Denmark, Ireland, Luxembourg and Switzerland are LMC estimates.
  
• Italy: latest month provisional estimate by Motorizzazione, previous months based on estimate of eventual revisions to Motorizzazione data.
  
• Spain and Portugal: figures include sports utilities, which are reported separately from cars.
  
• Netherlands, Germany estimated from data excluding final days of month.
  
• UK: includes estimates for non-dealer sales.
  
• The percent change in the final column compares the average selling rate in the year-to-date with the last full year.
  
• The average of the seasonally adjusted selling rate for an entire year is by definition the total volume of sales in the year.