West European car sales declined by 1.9% in September as consumer confidence fell in the wake of the credit crunch impacting the European economy. However, JD Power Automotive Forecasting analyst Pete Kelly told just-auto that it will be some time before we know to what extent higher real interest rates will depress the market over the next few years.

“We are forecasting a Western European car market of 14.7m units for 2007 and a little under 14.6m units for 2008. We have shaved off around 50,000 units from our 2008 volume forecast directly as a response to the credit crunch situation and the wider impact on consumer confidence that has come through,” Kelly said.

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Kelly maintained that some national markets were on the way down anyway and that the typical impact of interest rate rises tends to be somewhere between 12 and 24 months.

“Even though the ECB and the Bank of England have been holding their official interest rates pretty level, we’ve had a real terms increase in the cost of borrowing and that’s probably what’s going to have some sort of adverse impact next year,” Kelly said.

“That’s not to say that the banks won’t loosen monetary policy to compensate, but in reality some of the damage has been done,” he added.

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Car sales in Germany remained decidedly cool in September pushing expectations for the full-year 2007 market to a 9-10% fall, according to JD Power.

A 2008 German market rebound is expected, but the forecaster cautioned that clarity over the new annual circulation taxation will need to come soon if this is to take place.

The UK market came in at 419,000 units (+1.3%) in September, spurred on by the new registration plate which pushed private retail sales up by 1.5%. The UK market result was at the top end of expectations, against a backdrop of a slowing economy and tightening monetary conditions, JD Power said.

The UK market faces a downturn in 2008 according to JD Power.

The Italian market was described as ‘normalising’ after a surge in the first half of the year related to a government scrapping incentive while the French market cooled slightly in September.

JD Power estimated the West European car market at 1.37m units in September, 1.9% below the same month last year. Cumulative sales for the first nine months stand at 14.26m units, 0.7% down on the same period last year.

Dave Leggett