New car sales in Western Europe were 0.3% up in January over the same month last year according to JD Power figures. However, the slight gain reflected an additional sales day in many countries and the underlying demand picture was weakened, as expected, by a ‘payback’ decline in Germany.
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German sales were down by 10.5% year-on-year even with an extra selling day in the month. In Germany, the sales spike coming at the end of last year, due to a pull forward in sales prior to the 2007 VAT increase (3 percentage points from Jan 1), has been followed by a weak January result. The seasonally adjusted annualised rate of sales (SAAR) fell to 3.0m units/year, having averaged 3.9m units/year for the final couple of months of 2006.
However, JD Power said that the French, Italian and Spanish markets were off to a good start in January though the UK market was weak.
The data analyst and forecaster maintained that with Italian scrapping incentives now in place, this will likely lead to a stable if not slightly improving car market in Western Europe for 2007.
It is expected that it will take another couple of months before the distortion caused by the VAT change in Germany is ironed out and that it will likely lead to a weaker outturn in Germany for 2007 than 2006 as a result.
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By GlobalDataNew car registrations in Italy were up 2.4% in January, the market carrying on the momentum built up last year. The Italian government has now put in place an incentive scheme that encourages the scrapping of Euro 0 and Euro 1 cars, the incentive being worth EUR800 so long as the new car has C02 emissions under 140 g/km.
On the face of it, the January result in the UK of a 5.2% year-on-year gain would be considered fairly strong. However, behind this number we must take into account an extra working day as well as the previous January being unusually weak (it was down 13% year-on-year) due to a change in company car tax affecting diesels. Given this, the picture looks less rosy, JD Power said.
The UK economy is gaining momentum but with interest rate increases placing opposing pressure on car sales JD Power said it does not expect to see the UK market making progress this year on last.
In Spain, the market got off to a fairly good start this year but whether the announced ending of the Prever scrapping incentive is carried through (which is by no means a forgone conclusion) will be a key influence in dictating its total market for 2007.
France is expected to improve this year having been a disappointment in 2006.
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