The European car market turned in a strong overall result in June, with the seasonally adjusted annualised running rate (SAAR) turning out at a highly respectable 14.7 million units. However, that apparent good cheer needs to be seen in the context of another mixed picture in terms of sales by country. The buoyant UK and Spanish markets contrasted somewhat with a poor sales month in Germany and further evidence of weak demand in Italy. This report is from JD Power-LMC.


  • West European car sales enjoyed a strong June – the seasonally adjusted annualised rate of sales topped 14.7 mn units/year, only marginally below the strong March out-turn.

  • Once again it was the UK and Spain that helped support the market. The UK market was on a level with the very strong result a year earlier, while record sales continued in Spain.

  • French demand also picked up a little steam, producing the strongest selling rate in the year to date.

  • But Italy and Germany both disappointed somewhat – both markets will struggle in 2004 to beat the markets of 2003.

The old patterns remain entrenched within Western Europe’s car market. High levels of consumer confidence in the UK and Spain, with resulting strong car markets, are in stark contrast to the situation in Germany and, to a lesser extent, Italy. The German consumer is yet to respond as had been hoped to a steady economic recovery which seems to be passing them by. There are some signs of improvement in consumer survey data, but too little to expect a firm recovery in car sales just yet. It will be interesting to see just how long the two locomotive markets in the UK and Spain can sustain their current strength and counteract, as they are doing quite successfully to date, weakness in Germany. One positive result came from the French market where sales jumped, hinting that a recovery may be under way.

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Year-to-date figures are somewhat misleading as they show sales up by over 3% – surely that must indicate healthy growth? The flaw in this assumption is that sales during early 2003 were exceptionally weak, perhaps marking the bottom of the recent cycle: outperforming 2003 in the latter part of 2004 will prove to be a more challenging task.

The chart above 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 was one more selling day this June, compared with 2003.

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The German market sent out, after two months of moderately positive results, a rather downbeat message about the current state of demand. The selling rate dropped to under 3.1 mn units/year underlining the weakness in consumer demand. In year-on-year terms sales were higher in June than in 2003 (up almost 4%) but calendar effects were largely responsible for this gain. Looking forward, the news is not all gloomy. Consumer confidence recorded an upturn after three months of decline and incoming orders offer some hope of mild improvement in car sales. A market close to, but perhaps now slightly below, last year’s 3.24 mn units is now in prospect for 2004.

In the UK an early estimate for the June result undermined fears that an easing in the market was in prospect for the remainder of 2004. The selling rate bounced back sharply to almost 2.8 mn units/year. It is possible, given that the June 2003 selling rate was also immensely strong, that the seasonal pattern is shifting again and that we are underestimating the weight of the month of June: the July result will offer us some guidance on this issue. But in the absence of any other information we must take the result at face value – and it was very strong.

In Italy the June result provided some evidence that the weak order intake is finally catching up with the market – and that, despite the use of incentives by manufacturers, sales cannot be supported indefinitely in a poor demand environment. Consumer confidence remained weak and essentially unchanged from May. Incoming orders showed some stabilisation but little hope of a rebound. We now expect that 2004 will now come in marginally lower than 2003 at around 2.25 mn units.

In France the June result may be an indication that the tide is finally turning. The selling rate improved upon the positive result in May, rising to 2.16 mn units/year. We remain concerned at the low level of consumer confidence, and the June result was clearly helped by incentives, but if the anticipated improvement in the economy is to come about in 2005 then we could be seeing the first signs in car sales – we have increased our expectation for 2004 in response to the more positive trend in car sales to almost 2.05 mn units.

The Spanish market continues to be a source of good news for Europe’s car industry. Sales were up by a massive 15% year on year in June and the selling rate remained in record territory, comfortably above the 1.6 mn units/year level. Consumer confidence has slipped slightly in the two months since April but not yet enough to cause concern. Meanwhile, new car purchases by rental companies appears to completely recovered from the March terrorist attacks – fears over the impact of the atrocities on tourism had caused the rental industry to take a step back. Private sales remain strong. A market not substantially below 1.6 mn units remains in prospect for 2004.

Among smaller markets the boom in Finland seems to have passed while an early estimate from the Netherlands looks less than inspiring. Greek sales were very strong and should remain so.

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