Summary



  • April was a cruel month. At first glance, the 2.1% estimated increase in West European car sales looks reassuring. Then, when one recalls that there was one fewer Sunday, and no Easter, this April, the results appear in a much less favourable light.
     
  • But it is very difficult to eradicate calendar influences completely. We take account of explicit public holidays, but the configuration of holidays in April induced many Europeans to take a long “bridge” holiday between Whitsun and May Day. Because of this the results may be less alarming for the industry than a glance at our chart might suggest.
     
  • The Spanish and Italian markets continue to give the most obvious causes for concern. French demand remains stable at a high level; German demand stable at a low level. Meanwhile the UK market is showing the first signs of cooling from its recent white heat, and is no longer able to make good the sales losses being experienced in the Eurozone.


The little dots on the chart below, signifying the monthly seasonally adjusted selling rates (SAARs) are beginning to point downwards in an alarming fashion, which may have many of our readers fumbling for their safety belts. And there is no denying that the April result was very disappointing, bringing the lowest selling rate for nearly five years. Essentially, what is happening is that new pockets of weakness are opening up in Western Europe, while there are no new sources of strength.


It is possible that the 13.8 mn unit/year selling rate that we are showing in our Table and Chart exaggerates the current weakness of the market. Many Europeans took the opportunity to bridge the gap between Whitsun and May Day by going off on extended holidays, and this may have been responsible for the fact that the sales volume fell below the amount that would have been suggested purely by the number of potential selling days in the month. However, if one ascribes much of the blame for the weakness of the March figures to calendar factors, one must logically expect a better outcome in April. The bottom line is that, if one puts the two months together, the sales volume was still over 4% lower than in the same two months of last year. And, if the year-to-date cumulative decline of 2.7% looks reasonably modest, one should remember that the selling rate rose strongly in the second half of last year. As the final column of our Table shows, the average selling rate in the first four months is almost 8% lower than last year’s out-turn.


If one includes light commercial vehicles then one arrives at a cumulative year-to-date decline of 3% in total light vehicle sales, rather than the 2.7% shown in the Table below for cars alone. Adding in the EU applicant countries of Central and Eastern Europe makes very little difference to this percentage change.


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. 

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German sales look likely to have been pretty much in line with the 3.2 mn units/year selling rate that we saw during the first quarter. We expect a figure of something under 310,000 units. As our Table shows, this would represent an improvement on the year-earlier figure, but not enough of an improvement to offset the very disappointing March result. Our original estimate for March turned out to be too high, with sales at the end of the month falling away much faster than we (but not our percipient friends) had expected. Strategically, the conclusion to take away from all the numbers that we have for this year is that the selling rate in Germany is still languishing at around 3.2 mn units/year, with only faint signs (from sources such as the second-hand market, which is beginning to improve) that a recovery is under way.


Once again, the results from Italy were distinctly poor. Although the 13.4% fall in April sales is pretty much in line with the percentage change for the other months of the year so far, calendar considerations mean that its implications are more alarming: the selling rate slipped below 2 mn units







“[italy] .. the decline in incoming orders was less than the decline in new registrations”


/year for the first time since 1996. There are some mitigating factors to be considered. The one-day strike against the reform of labour markets, which took place in mid-month, will have disrupted some sales. In addition, Italians were among those who took greatest advantage of the opportunity to have a spring holiday between the two bank holidays. The ANFIA press release drew some comfort from the fact that the decline in incoming orders was less than the decline in new registrations, but there is no mistaking the fact that incoming orders too are now trending downwards (by 12% in the first four months of the year), even if the total backlog of unfilled orders is still relatively healthy.


France remains a reliable bastion of strength for the European automotive industry. Total sales in April were up by 3.4%. This still represents a fall of 1.6% when adjusted for the number of working days, but this is a very modest decline, from a rather strong result last year. The seasonally adjusted selling rate remains at a relatively solid level of 2.2 mn units/year. Consumer confidence has maintained the sharp improvement that was seen in March. Domestic producers have continued to increase their domestic market share (as well as increasing their share of other European markets).


The results for the UK look good, and certainly are good. Retail buyers continue to provide the majority of the growth, with dealer sales up by almost a quarter in April, compared to the 8% rise in fleet and business sales. But our reading of the April results suggests that the peak of the car-buying boom now lies in the past. The selling rate last month dipped below 2.5 mn units/year for the first time since last August. During the course of the month, a budget was introduced whose explicit purpose was to switch the focus of growth from private to public consumption, particularly of health services. The results will not appear in pay-packets for another year, but the knowledge of what is to come is likely to dent the spending urge. Diesel-engined vehicles have been in particularly strong demand, with a 60% year-on-year increase and a 23% share of dealer sales, influenced by changes in company car taxation.


The precipitate weakening of the Spanish car market, which has been in evidence in recent months, continued apace in April. The selling rate fell below 1.3 mn units/year for the first time in four years. Although consumer confidence recovered slightly in April, after a particularly severe fall in March, it is still well below the levels typical of last year. The decline in the market has been shared between both the rental and non-rental sectors, with the former declining slightly more rapidly. A 17% reduction in the volume of sales incentivised through the Plan Prever contributed to the downward trend in the automotive market in April.


The Portuguese market also showed a particularly severe fall in April. Last month saw a changeover to a new government, which has become aware of the need for higher taxes to prevent government borrowing from exceeding its target by a wide margin. The steps which it will have to take to prevent this are likely to add to the depressed conditions in that market. On the other hand, April figures brought more signs that the Scandinavian markets have passed the trough of their recent downturns.