Summary
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- Demand for cars continues stable, on a month-to-month basis, in Western Europe. The selling rate in August was 14.4 mn cars/year, almost identical to the value in the preceding month. This is also in line with the average selling rate for the year to date.
- Until August, French sales had remained reliable and predictable, even though the underlying trend was slightly downwards. The result for August came as a nasty shock. However, August is too volatile a month for reliable conclusions about the underlying level of demand from this result alone.
- A much stronger result for Italy shows that government incentives are beginning to have some effect on total sales. But their impact on Fiat’s sales, which are perhaps the government’s policy target, is being offset by market share decline.
- The German result was broadly encouraging. Since seasonal factors have a less profound impact on August sales in Germany than in France, it would not be inconsistent to draw more encouragement from the German figures than discouragement from the French.
- Among the smaller countries, Portugal had a particularly poor result, but Scandinavian demand continues to improve. Only in Belgium was there an echo of France’s disappointing sales.
Eight months down, four to go. The margin for error in assessing total sales this year is diminishing. Over the last ten years, the first eight months have never accounted for less than 69% of total sales, or for more than 72%, with an average at 70%, and a standard deviation of 0.8%. However, our purpose here is not to provide forecasts: the development of the UK market in September will be very important, and could still surprise. The August result confirms the theme of stabilisation that we have stressed for the last two months. The selling rate remained stable at 14.4 mn units/year. A very unpleasant surprise from France was offset by the first pleasant surprise from Germany for some time, and by evidence that the Italian market is responding to the medicine of the government incentive package. The UK continues to show strong demand, though August is, with February, the least significant month of the year.
For total light vehicles, the cumulative year-on-year decline is identical to that for cars alone, at 4%. The SAAR on this measure (which is the right measure for making comparisons with the widely reported US numbers) is 16.0 mn units in August, and an average of 16.1 mn for the year to date. Broadening the geographical definition to include the EU applicant countries brings the cumulative decline to 3.6%.
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 five-month moving average of these. (Next month, the dire result for April will drop out of that moving average). We indicate the latest two months. The most recent numbers underlying this chart are appended in the table at the end of this note.
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By GlobalDataAugust will be a good month for German car sales, which we currently expect to come in at around 248,000 units, and possibly a few thousand higher. Unless the final days bring some major surprises, this will be the strongest seasonally adjusted selling rate of the year to date. Putting it together with other recent results, the picture that emerges is of a market that reached a trough at the end of the first quarter of this year, and has been trending upwards in the five months since then. That is perhaps not surprising, since the 3.2 mn selling rate at the trough was lower than has been seen since the much deeper economic recession of 1993. Moreover, the available information on incoming orders provides, at the very least, no reason to suggest the recent upward trend in sales is about to be reversed. It is true that the increase in orders has been more pronounced for imported marques than for domestic producers, but that is of course irrelevant to the size of the overall market.
The August results brought the first signs from the registrations data that Italian buyers are responding to the government’s incentive scheme. July had brought no change in the registrations trend, but positive results in the incoming orders data, and the trend towards stronger new orders continued in August, with a 6% year-on year increase over what was still quite a strong figure in August last year. The selling rate in August was 2.3 mn units/year, a big improvement on the preceding months. Both ANFIA’s press release and that of UNRAE (the Italian manufacturer’s and car importers’ associations) refer to hopes that the incentives will be made permanent, rather than expiring in December as originally announced, but there is no confirmation of these hopes. An end in December would, of course, be likely to produce the effect of a bang in December followed by a whimper in early 2003, as consumers bring their purchases forward. Fiat’s market share in August continued to be about two percentage points lower than the previous year, in line with results for the year to date.
French sales of 121,889 cars in August were much lower than the recent trend suggested. Not since 1997, a year in which total sales were a mere 1.7 mn units, has there been such a low August figure. There had been some warning that this would be a poor month, in the form of a weak order intake in July. The CCFA’s press release alluded to buyers waiting for new models to be launched at the Paris motor show in September, an explanation that we find only partially convincing. More significant may be changes in holiday habits, which could have distorted the normal seasonal pattern of sales. August is a month in which the margin for error in seasonal adjustment is the greatest. This spectacularly poor result puts the spotlight on next month’s figures to provide an indication of whether the August result was a freak or a change in trend. The health of the French market has become suspect, but one month’s data is never decisive, especially if the month is August.
August is a very subdued month in the UK, thanks to the double effect of summer holidays and the imminent arrival of the new registration plate. Dealer sales of 87,245 units, a 12.8% increase, represent a good result, though it is only an overture to the real drama of September sales, whose absolute volumes will be between four or five times greater. The annualised selling rate at nearly 2.7mn units/year is not far short of the very high level seen in July. Throughout 2002 vehicle demand in the UK has been predominantly driven by the private sector, which rose by a phenomenal 29% in August, compared to 9.3% over the last 8 months. Unsurprisingly, fleet sales and business demand were somewhat sluggish during August, but looking at the January-August period, business sales showed the biggest increase with 10.4 percentage points while fleet sales gained 4.5%. Diesel demand in the UK has continued to soar, by nearly 49% over the year to date, pushing UK diesel penetration to 22.8%. According to the Halifax, house price inflation showed the first signs of cooling in August, but UK interest rates have been left unchanged at 4% for the tenth month in a row. There are only inconclusive signs of the expected cooling of the consumer boom.
For the third month running, the selling rate in Spain came in at 1.4 mn units/year. This was a positive outcome, in the sense that the trend has been strongly downwards for most of the last year, so that any signs of stabilisation comes at a pleasant surprise (particularly in the context of recent economic data that confirm that the Spanish economy is itself continuing to slow down).
Of the smaller countries, Belgium and Portugal produced notably poor results, offsetting the continued recovery in Scandinavian demand.
Charles Young (cyoung@lmc.co.uk, +44-1865-791737)
Oxford, September 5th 2002.
Notes:
- Austria, Denmark, Ireland, Luxembourg and Switzerland: estimates for latest month
- Italy: latest month provisional estimate by Motorizzazione, previous months based on estimate of eventual revisions to Motorizzazione data.
- Spain and Portugal: figures include sports utilities, which are reported separately from cars.
- Germany and Netherlands: estimates based on information covering part of the latest month.
- UK: includes estimates for non-dealer sales.
- The percent change in the final column compares the average selling rate in the year-to-date with the last full year.
- The average of the seasonally adjusted selling rate for an entire year is by definition the total of sales in the year.
