January was a very disappointing month as far as the West European car industry was concerned. For those who lack any standard for judging the figure other than the very crude one of comparing total sales during the month with the figure for the same month of the previous year, it may not appear too bad. When final figures are in for all the late-reporting countries, we would expect it to show an increase of one or two percent on this basis. But in reality it was much worse than that comparison suggests, for two reasons.
Firstly, there were two additional working days in which vehicles could be sold and the registration data processed. Secondly, it was the first January in which the French model-year coincided with the calendar year. French sales used to be heavily bunched in July, when the model-year began. Yet expectations of a significant increase in French January sales were disappointed. The West European outcome for January, plotted on our Diagram below, should clearly be taken in conjunction with the December figure, which was relatively strong.
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Taking the two months together, we can see clearly that any hopes that the December number might mark the end of the steady decline that has been going on since late 1998 were premature. By our reckoning, after making allowance for the number of selling days and changed French seasonality, the January results imply a seasonally adjusted annualised rate (SAAR) of under 14.2 mn units/year, one of the lowest in the recent past. The underlying trend, which started last year at about 15.4 mn units/year, now stands at around 14.7.
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.
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Final German sales figures for December confirmed the improvement suggested in our last report, though the result of 240,861 sales was a little lower than our preliminary estimate of 245,000. However, here, as in the rest of Europe, the January numbers look like producing a severe setback. Our sources, based on analysis of all but the last few selling days, suggest that the figure will come in again at around 245,000 units. For January, that is a very low number, corresponding to a SAAR of under 3.1 mn, well below last year’s out-turn of 3.38 mn units/year. True, it would be some 11,000 units higher than January 2000, but for one thing, January 2000 was a terrible month, and for another thing, there are those extra working days. It is particularly disappointing when read in conjunction with the recent rather positive evolution of German consumer confidence, which has been rising since last October, and rose quite strongly in January. The rise in consumer confidence suggests that German households are fully aware of the tax cuts that are in store for them, and of the increased job security as unemployment continues its steady decline. But they are just not choosing to demonstrate this confidence in the car showrooms, at least for the present.
“January numbers look like producing a severe setback.” |
The French results deserve close analysis. The figure of 191,750 car sales was 21,816 more than the previous January. A large proportion of that 12.9% gain could simply be attributed to the additional working days. Prior to the ending of the millesime, the bunching of sales in July meant that about 27% more sales were made in July than in an average month, and about 25% fewer were made in June. It will take time to make a full adjustment to the new regime, and we certainly never expected January to immediately gain the same weight as July. Under the old system, January had about 8% fewer sales than the average month. Our estimate is that the norm under the new regime is for January to have 8% more sales than the average month. On this basis, the reading of underlying demand that is implied by the January number is perfectly consistent with the results that we have been seeing for the last six months. We are increasingly confident that the SAAR in France at present is around 2 mn units/year, significantly lower than the 2.13 mn sold last year, and about 10% below the selling rate during the first half of last year. We would be the first to admit that our interpretation of the selling rate in January itself is subject to a wide margin of error, but this would be very likely cancelled by compensating errors in interpreting the previous months, and would be unlikely to affect the strategic diagnosis that the underlying level of demand in France in the recent past is around 2 mn units/year. While this is somewhat discouraging, data on incoming orders are mildly positive, and suggest some improvement in later months.
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By GlobalData187,908 cars were sold through dealers in the UK in January. This was very close to the previous year’s volume, but conceals a massive change in the composition of demand. Private sales were some 28% higher than they had been last year, while other sales were 14% lower. The overall result is somewhat disappointing, particularly coming after the spectacularly strong December figures. At the same time, it is not unexpected, since private buyers have the double incentive of price reductions plus a strong level of consumer confidence, while businesses can no longer expect such favourable terms under the new regime, and business confidence is also much more vulnerable than consumer confidence, as the clouds of recession gather over the US and it becomes clear that global economic growth has slowed dramatically. The SAAR implied by the January number is 2.28 mn units/year, which is very close to last year’s figure of 2.3 mn (both figures include estimates for vehicles purchased by routes other than UK dealers). Thus, even if it did not confirm the hopes born of last month’s figure, it still shows a stable and relatively strong market.
Italy was the one bright spot in a generally rather negative European market. Even though the January sales of 274,000 units exceeded the previous year’s volume by less than the additional working days might have justified, it so happens that the previous January was itself an unusually strong month. Fears of a decline after sales of non-Euro-III-compliant cars had been forced at the end of last year have been proved groundless. Moreover, the level of incoming orders remains consistent and relatively strong. The SAAR in January was over 2.4 mn units, closely in line with last year’s out-turn. The underlying trend may even be a little bit higher than this, since the December figure was also a remarkably good one.
“Italy was the one bright spot in a generally rather negative European market.” |
For a number of smaller countries, in particular the Netherlands and Ireland, January is a particularly important month, in which a high proportion of total annual sales are concentrated. The figures for Ireland last year were abnormally strong, distorted by tax changes, so it was inevitable that they would be lower this year. However, the actual result, which was some 8,000 units lower, does confirm that some of the heat has now gone out of what has been an exceptionally strong level of Irish demand. We do not yet have final figures for the Netherlands, but based on data for the first 20 days of January, it looks very likely that these too will show a significant decline on the previous year’s volume, as a result of a hike in value added tax which caused buyers to pull their purchases forward into last December. In Belgium, sales have remained relatively unchanged in absolute terms, though this represents a decline when the additional selling days are taken into account. In Spain, the most important of the smaller countries, it was a foregone conclusion that sales would be substantially down when compared with January 2000, given the steep decline in the SAAR that had been seen during the second half of last year. However, the figure of 99,393 cars (including sports utilities), a decline of 4%, was a little better than the results for previous months might have implied. The selling rate there is currently 1.4 mn units/year, compared to last year’s 1.47 mn.
Oxford, February 6th 2001.
