The see-saw performance of the European car market so far this year was reinforced in May when the market appeared to come back signficantly from April’s low point. A number of markets recorded a reasonably solid month but a poor month in Italy, where car sales were disrupted by industrial action, dragged the overall European figure down. This analysis is from JD Power-LMC.
Following a year-to-date high in March, and then a year-to-date low in April, the West European selling rate 14.30mn units/year in May was at least less extreme, if somewhat lacklustre. Relatively solid performances came in from a number of markets, although the overriding factor had to be the drag on sales coming from Italy. Italian car sales were down 28.6% year-on-year with the implied selling rate standing
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Summary
· West European car sales fell 1.1% in May, year-on-year. The seasonally adjusted annualised sales rate for the month stood at 14.30mn units/year, this confirming the currently weak sales environment.
· On the positive side, a strong implied rate came in from Germany in the latest month although even this key market failed to help offset declines elsewhere.
· Improvements also came in from two other major markets, France and Spain, although the same could not be said for the UK which is suffering from lower consumer confidence.
· Italian registrations were the big disappointment in May – the selling rate down to 1.58mn units/year in the face of a supply chain strike, adding to a weak economy and again unfavourable consumer confidence.
Following a year-to-date high in March, and then a year-to-date low in April, the West European selling rate 14.30mn units/year in May was at least less extreme, if somewhat lacklustre. Relatively solid performances came in from a number of markets, although the overriding factor had to be the drag on sales coming from Italy. Italian car sales were down 28.6% year-on-year with the implied selling rate standing at 1.58mn units/year – this compares poorly (to say the least) to the 2004 outturn of 2.29mn units which itself was not a great year. In fact, the Italian weakness meant that the overall West European market was down 1.1% year-on-year; with Italy excluded the region would have actually recorded a gain of 4.5%.
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Consumer confidence in Italy is of course not in a great state at the moment and neither is the economy, but the May figure was also affected by a strike which hit the supply chain and led to an order backlog – this should mean a stronger couple of months to follow. To a lesser degree, the UK market continues to underperform on last year, with consumer confidence again a key issue. Better monthly results came in from other major West European market, the highlight of which was Germany with a selling rate well up on the last few months. Italy and the UK look set to hold the region back for the full year though.
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By GlobalDataThe 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 were the same number of selling days in May, compared with 2004.
An implied selling rate in Germany of 3.68mn units/year meant that the month of May was the strongest for car registrations in the country (on a seasonally adjusted basis) so far in 2005. The latest result reflected slightly improved consumer confidence than has been observed over the preceding few months. While the latest data points to a much stronger selling rate than the outturn achieved for the full year in 2004, we envisage the full year 2005 outcome is most likely to come in very close to the previous year, held back to some extent by a lacklustre economy.
Following on from a disappointing selling rate of 2.08mn units/year in April in the UK, the selling rate in May was somewhat healthier, standing at 2.37mn units/year – indeed, excluding the high achieved in March, this was the best month so far in 2005. However, when looking at the latest result as compared to the level achieved last year there is less to cheer and the latest month’s car registration total highlights the generally weaker market. Consumer confidence fell again in May, this reflected by the fall in retail car sales. Fleet sales meanwhile remained fairly solid. Naturally, we expect a lower UK market this year as consumers hold back in a more uncertain environment; lower mortgage equity withdrawal remains a key issue. As mentioned last month, any short-term effect the MG Rover collapse has had on total market sales will be nullified for the full year.
The implied selling rate of 2.13mn units/year achieved in France last month keeps the market nicely on course for a solid improvement for the full year, as compared to 2004 (the May result coming after a weaker performance in April). A stronger selling rate was achieved last month despite a further fall in consumer confidence. Positives on the horizon include the benefits associated with an expected fall in the unemployment rate in the country although the recent “no” vote on the EU constitution will do nothing for business confidence.
In Spain, the implied selling rate in May again exceeded the strong 2004 outturn. The latest result made May the fourth month out of the first five this year to be up in year on year terms, the backdrop of a solidly performing economy continuing to assist the car market. Much of the growth came via the rental portion of sales while private sales, which make up the far larger share, expanded less enthusiastically. For the full year we continue to expect only a modest improvement on 2004 as we do not see current circumstances facilitating any major advances on historically strong levels.
Car sales in Italy have been really struggling recently and, as if to underline this, the implied selling rate in May came in at a shockingly low 1.58mn units/year, hit by truck drivers taking industrial action against car transporter companies. As elsewhere, consumer confidence is not in the best of shape and the economy in Italy is facing testing times (highlighted by the governor of the Bank of Italy’s expectation of flat growth this year). The level of incoming orders provides little comfort and while incentives will of course be an important feature of the market this year, even then total sales are expected to come in some way lower than the 2004 level.
Of the smaller markets, Ireland and Denmark continue to make positive contributions. Belgium had a better month although it is still down in the year to date.
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