Europe’s car market expanded by 5.4% in September raising hopes that a gradual recovery of demand is now in prospect.
ACEA, the European automakers’ trade association, said that the September car market in the EU area was up 5.4% on last year to 1,159,066 units. It did, however, caution that the month included an extra working day this year, which boosted the month’s tally.
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From January to September, new car registrations in the EU declined by 3.9%, compared to the first nine months of 2012, with a total of 9,000,629 cars sold.
ACEA said that in September, most major markets posted growth, from +3.4% in France to +12.1% in the UK and +28.5% in Spain. However, Italy (-2.9%) and Germany (-1.2%) saw their new car registrations decrease.
Nine months into the year, the UK was the only significant market to record an increase (+10.8%). Downturn prevailed across other major markets, ranging from -1.6% in Spain to -6.0% in Germany, -8.3% in Italy and -8.5% in France, leading to an overall 3.9% contraction in the EU, compared to the first nine months of 2012.
The ACEA numbers are consistent with those released by LMC Automotive earlier this month that showed car sales in Western Europe up by 5.3% in September.
Analysts generally expressed confidence that the car market in Europe will now enter a recovery phase, but cautioned that the recovery will be led by discounting and that structural problems in Europe – overcapacity and low profitability – will likely persist.
Carlos Da Silva, analyst at IHS, said that there was cause for optimism in the results. “Once again, on sheer volumes, Europe is not in a brilliant shape,” he noted. “Yet the underlying trend of the market is calling for a certain dose of optimism. The main message remains that the region should eventually reach the end of the tunnel in 2013 and should start seeing some rays of light more frequently and consistently from now on.”
Peter Fuss, Senior Advisory Partner, EY Global Automotive Center, said that he anticipates fourth quarter sales in the region to be flat or grow moderately. “Keeping up the momentum in 2014, we expect the region to register moderate growth.”
He warned however that market growth is being driven by manufacturer activity – discounts and self-registrations. “We estimate it will take at least two years for the market to witness the ‘real’ sales recovery, driven by replacement demand. This growth when it happens will be sustainable and not reliant on self-registrations and discounts. As a result, profits for automakers are likely to remain challenged at least until 2014 is out.”
In a note containing comments on developments in the five major European national markets, Fuss said:
United Kingdom
- “Car sales in the UK continue to defy the declines being witnessed in the region. The market has grown by 10.8% during the first nine months of the year. September was the 19th month of continuous sales growth and the best performing month since March 2008. This rise in sales can be attributed to the improving economic scenario, rising consumer confidence, and attractive discounts and financing schemes in the market.”
- “In terms of customer segments, sales continue to be primarily driven by demand from the ‘Private’ segment which has witnessed a substantial 16.7% growth during the first nine months of the year. The ‘Fleet’ and ‘Business’ segments also saw healthy sales growth of 4.8% and 15.3% respectively. ”
- “In terms of fuel mix, vehicles driven by all fuel types registered good growth. Sales growth for petrol driven vehicles has been particularly strong (14.1% during the first nine months of the year). This is because private segment buyers prefer petrol cars. Also, cars in the Mini segment (that has witnessed significant growth this year) tend to be petrol-fuelled. Further, plug-in electric vehicles are also witnessing spectacular growth (up by 70.7% during the first seven months of the year), albeit on low volumes. This growth has been driven by the increase in available models, increase in the number of charging points (with over 10,000 charging points now operational in the country), and government incentives.”
- “Moving forward, car sales growth is expected to remain strong during the last quarter, as the economy shows signs of sustainable growth. We anticipate car sales to witness growth of nearly 10% during the year to touch 2.25 million units.”
France
- “French consumers are holding back on discretionary spending as private sales fell sharply (11.8% decline during the first nine months of the year).”
- “A proposal to raise the maximum levy on purchase of high emission cars from €6,000 to €8,000 is likely to drive adverse sentiment in the market. It remains to be seen how the French Government will make changes to incentives for low emission cars.”
- “Apart from contraction in domestic demand, vehicle exports from France also declined by 3.5% during the first half of 2013, mainly due to a decline in exports. Consequently, automakers are operating at a capacity utilization level of under 50%. This explains some of the recently-completed and on-going negotiations with worker unions, as well as the urgency to trim down investments to tackle high fixed costs.”
- “Moving forward, we anticipate car sales in the country to register a flat to moderate growth during the last quarter. The market is estimated to decline by 5%–7% for the entire 2013; however, car production is estimated to decline steeply by around 18% during 2013 — the highest in the last eight years. We anticipate that the market will start picking up marginally in 2014. However, given the fragile state of the economy, with high unemployment levels and a changing mobility scenario, we do not expect the French car market to reach its 2007 peak of 2.1 million sales any time soon.”
Germany
- “While car sales in Germany have been declining during the year, the pace of this decline has slowed down significantly over the past few months. The market declined by just 1.4% during the third quarter. However, during the first nine months of the year, sales have come down by 6%.”
- “Consumer confidence and economic growth continue to gain strength and remain better off as compared to the rest of the Eurozone. Also, automaker and dealer discounts remain strong. However, German consumers, sceptical of the Eurozone crisis, have postponed discretionary spending, resulting in the average age of cars on the road reaching 8.7 years (one year higher than the pre-crisis level of 2007).“
- “Defying the overall market trend, luxury carmakers have witnessed sales growth during 3Q13, particularly helped by new launches. On the other hand, SUVs, which witnessed significant growth of around 13% during the past two years, seem to be losing their appeal and have reported substantial declines this year.”
- “During the first nine months of the year, car sales to private buyers (accounting for 38.6% of the market) and commercial buyers (61.4%) have declined by 6.3% and 5.9%, respectively. The share of tactical registrations to dealers stood at 22.9% during the same period, slightly up from 22.7% last year. This indicates that the domestic car sales scenario is much worse than what the headline figures suggest. “
- “Amid declining new car sales, automakers continue to look for alternative channels, such as used cars and mobility businesses, to drive growth. They are pushing used car sales through measures such as attractive leasing offers and fast-tracked loans. Similarly, premium brands and volume brands alike are looking at offering mobility services, such as car sharing.”
- “While we anticipate some positive sales growth in the fourth quarter, overall 2013 is expected to register a 3%-5% decline. SUV sales are expected to come down by around 15%, ending a few years of positive growth. This is further likely to result in a decline in diesel vehicle sales. While light vehicle production is forecasted to come down by around 3% during 2013, the share of overseas production for German automakers is estimated to rise to around 63% in 2013, from 60% in 2012.”
Italy
- “Car sales in Italy remain under pressure and have not shown any signs of improvement. The uncertain political scenario and the weak economic outlook are also weakening the sector. During the first nine months of the year, car sales declined by 8.3%. A VAT hike (scheduled for 1 October 2013) helped limit the decline in car sales during September 2013 to 3%.”
- “September was the 25th month of continuous decline in sales. Also, the sales volume during the month was the worst sales volume for September since 1976. “
- “During the first nine months of the year, the biggest customer segment – private buyers (accounting for 61.8% of sales), was down by 8.3%, while the second largest segment – car rentals (accounting for 18.9% of sales), declined by 9.5%. Car sales for all other customer segments, except leasing to individual customers, witnessed a decline.”
- “With GDP forecast to drop by more than 1.5% during 2013, we expect Italian car sales to go down by 7% for the whole year to around 1.3 million units – almost half of the pre-recessionary sales level of 2007, and reaching historic lows not seen in more than 23 years.”
Spain
- “The car market in Spain has witnessed a turnaround during the third quarter of 2013 and registered a growth of 7.2%. This comes on the back of the scrappage scheme, which has boosted car purchases by private customers.”
- “However, during the first nine months of the year, the market is still down by 1.6% and is the worst sales performance in more than 23 years. This is mainly due to a 20.4% decline in sales to the business channel. The rental channel is down by 0.4%, while sales to private customers are up by 10.5%.”
- “Moving into the last quarter of the year, the market is expected to continue the upward movement and close the year with almost flat sales growth.”
See also: COMMENT: Europe’s recovery comes into view
