Strong European car sales in March provided one of the most up-beat economic messages to have emerged from the region in the recent past. The selling rate approached 15 million units/year, and, thanks in part to helpful calendar effects (additional working days), the volume of cars sold increased by around 8% compared to March last year. Cumulative sales in Western Europe are now some 3.4% above the year-earlier level.
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It was the smaller countries that contributed a disproportionate amount of the growth in demand, with substantial growth in countries such as Greece, Ireland, Norway and Portugal. Among the larger countries, German demand showed only marginal signs of strengthening, and the gain in French sales was barely more than the calendar effects alone would have contributed. Spain, however, produced an exceptionally large volume of sales, and the UK market showed no signs of weakening, after a long period of remarkable strength. Car demand was also better than expected in Italy – the year-to-year comparison is misleading here, since exceptional factors (the ending of a government incentive scheme) pushed up the volumes in March 2003.
Summary
- March brought another improvement to West European car sales, with the selling rate approaching close to 15 mn units/year, and the month bringing about 8% more units sold – helped in part by more selling days.
- The source of the gain was spread across a wide range of countries, but derived disproportionately from the smaller countries. The French and (even more) the German markets made a relatively minor contribution to the improvement.
- Spain and the UK, and to a lesser extent Italy, continued to provide strong support, though in the case of the UK the support came in the form of the maintenance of the strong selling rate, rather than through any further rise in the rate.
- Countries outside Western Europe also contributed to the growth, with the Polish and Turkish markets having shown substantial improvement in the year to date.
In a month in which so much of the other economic news that has been coming out of Europe has hinted at the threat of a stalled recovery, the data on new car sales provide some encouragement. The selling rate was close to 15 mn units/year, which was a little better than the 14.5 mn which has been the average of the last few months. As we have pointed out in previous months, the January figures had been distorted by the aftermath of an exceptionally strong December – those two months should really be taken in conjunction with each other. This is still having a noticeable impact on the year-to-date figures.
March 2003 had five Saturdays and five Sundays, while March 2004 had only four of each. Many reporting countries counted two extra working days this month – since we count Saturday as a selling day, we counted only one extra selling day. It is therefore possible that calendar effects were more important than we have calculated, which would mean that the improvement in the underlying selling rate was a little smaller than we show. But, leaving aside statistical quibbles, it is clear that March was a good month, with sales about 8% higher than last year. The growth in pan-European car sales will have been even stronger, at about 8.4%, thanks to good results from Poland and Turkey, and is closer to 9% if light commercial vehicles are included in the total.
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By GlobalDataThe 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, there was one additional selling day this March.
German car sales in March look set to come in at close to 350,000 min unit – our estimate is fractionally higher than the VDA’s, but time will tell. What is already clear is that the improvement in European sales as a whole during March owed relatively little to Germany. The selling rate of around 3.25mn units/year is only a little better than the previous couple of months, and is not very different from what was achieved in 2002 and 2003 as a whole. Of course, Germany has been the source for some of the disappointing economic news over the last month, with the ifo index falling again, and consumer confidence making no further gains in the course of the year. Some earlier indications that consumer spending might be recovering do not appear to have translated into any improvement in car demand for the present. The trend in new orders for cars remains weak (particularly as far as imported cars are concerned), and the outstanding stock of new orders remains at a relatively low level, providing little reason to expect a major improvement in the selling rate in the future.
Once again, the UK market provided very solid support to the European car industry in March – which is, of course, a particularly important month in that it brings the new registration plate and a seasonally high volume of sales. The March selling rate remained at just over 2.6 mn units/year, exactly in line with the performance in recent months, and most of the year-on-year gain can probably be put down to calendar factors. Thus, as in Germany, there was little change in the underlying rate – but whereas this was disappointing news in Germany, it was positive news for the industry in the case of the UK, where sales have been above what most would regard as being their long-run trend level for several years. Private buyers played their full part in the strong March result. Consumer confidence remains stable at a relatively high level, buoyed by strong property and equity values.
In interpreting the provisional sales of 250,500 new cars in Italy, it must be borne in mind that government incentives had a strong impact on the previous year’s result. The outcome is therefore much more satisfactory than the year-on-year comparison would suggest – indeed, we estimate the selling rate in March to have been close to 2.5 mn units/year. The order inflow was also strong, suggesting continued strong registrations in coming months. A relatively rich crop of recent models may have helped towards this result – though most of these models are at the small end of the segment spectrum. These satisfactory results are all the more reassuring, in that Italy is one of the countries in which consumer confidence has fared the worst – even after a slight improvement in March, it remains at levels well below any seen in the last seven years.
Although French sales participated in the general improvement, it is still premature to talk about an improvement in the underlying trend. We suspect that calendar factors may have made a bigger contribution, and that the underlying selling rate may still not have moved much from the 2 mn units/year that we saw last year. Still, it would be wrong to put too negative a gloss on the figures. At the least, the March result did suggest that the decline in the underlying selling rate, which has been evident for the last 30 months, may now have bottomed out. The improvement in car demand during March was concentrated in the import marques, with very little rise in the sales of PSA and Renault vehicles during the month.
Spanish car demand remained very strong, as it has for the last four months or so. The selling rate remained in excess of 1.6 mn units/year, only slightly less than the exceptionally strong February result. The strength came mainly from private sales, rather than from rental sales. Considering what the Spanish people have been through in the course of the last month, it would not have been surprising if sales had fallen back substantially. The consistent resilience of demand in recent months makes it increasingly probable that total car sales this year will show a very substantial rise.
All of the smaller countries contributed significant amounts towards the strong result in March. Greece, Ireland, Belgium and Norway all turned in exceptionally high figures, and as we have indicated, the results among the acceding countries also contributed to the general rise in vehicle demand.
