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Customer LoginsSame-Day Analysis: EU passenger car growth rate softens in October
Passenger car demand growth in the European Union (EU) has softened during October. According to the latest data published by the European Automobile Manufacturers' Association (ACEA), registrations stood at 1,104,868 units this month, an increase of 2.9% year on year (y/y). However, earlier gains in the market were well in evidence in the year-to-date (YTD) results, with registrations in the market having increased by 8.2% y/y during the 10-month period to 11,523,903 units. In addition, in the European Free Trade Agreement (EFTA) area - comprising Iceland, Norway and Switzerland - registrations have fallen by a marginal 1.4% y/y to 39,341 units, although its registrations in the YTD remain up by 7.5% y/y to 402,231 units.
In line with the weaker overall growth this month, key markets in the region had a more sluggish October, although many of these have not been helped by one less working day than during October 2014. This included both France and Germany, which rose only slightly, while the UK recorded its first decline in monthly registrations for 44 months. Spain also rose by a smaller amount than it has done previously, up 5.2% y/y versus a gain of more than 20% in the YTD. However, its situation has been compounded by there being two fewer working days than in October 2014. Italy was the biggest gainer in this quintet with a gain of 8.6% y/y, but even this was a more sluggish performance than in some earlier months.
Despite the softness, other markets in the region have recorded strong, double-digit percentage gains. They include the Netherlands (which is benefiting from a pull-forward due to impending tax changes) and Sweden (where registrations are powering ahead on positive economic factors). Others have included Ireland, Portugal and a host of markets in Central Europe, which are continuing to record improvements following the Eurozone economic downturn and the low base of comparison.
The situation in the EU this month is also reflected in many OEMs' registrations, including the Volkswagen (VW) Group which has recorded a dip in registrations of 0.5% y/y to 276,771 units, but held onto a quarter of the market. Although the mainstay VW brand has slid by 0.2% y/y, the Skoda and SEAT brands had an even worse month with declines of 2.6% y/y and 11.4% y/y, respectively. However, their performances was partly offset by a 4.1% y/y gain for Audi and a 13.9% y/y jump in registrations for Porsche. However, other OEMs suffered even worse performances. Second largest PSA Peugeot-Citroën recorded an decline of 0.9% y/y to 117,785 units as its Peugeot brand was unable to offset the downturn recorded by Citroën and premium brand DS Automobiles, as Renault Group fell 0.7% y/y to 106,728 units as Dacia was a drag. Others included General Motors' (GM) Opel Group (-2.7% y/y), Toyota Group (-3.5% y/y) and Nissan (-3.8% y/y).
However, other OEMs have had a more positive performance this month, with some relatively strong gains. Premium brands were an important contributor to this, with BMW Group (+13.4% y/y), Daimler (+21.0% y/y) and Jaguar Land Rover (JLR; +32.5% y/y) all surging. Mainstream automakers have also made some significant contributions, with Fiat Chrysler Automobiles (FCA) up 8.0% y/y, Hyundai up 4.2% y/y and Kia growing by 8.5% y/y. Mazda rose 34.3% y/y thanks to the popularity of its new CX3 crossover and other models in its range.
Outlook and implications
Although October marked another positive sales month for the region, as noted there has been some deceleration in its rate of growth. However, Carlos Da Silva, manager for IHS Automotive's European light-vehicle sales forecast has said that this late in the year slowdown had been expected and has been part of our base scenario for some time. As well as the fewer working days recorded, the seasonally adjusted annual rate (SAAR) - the underlying sales trend of the market - shows this slight slowdown, acknowledging the possibility of softening.
Da Silva notes, ''The fact is the market has been supported by a strong pent-up demand made of numerous cars that were not purchased/renewed during the crisis. This catch up phenomenon has been at play for two years now and it is reasonable to think that it might have started levelling off a little." For example, he points to private demand in the UK market having declined - a key driver to its earlier, ongoing growth - for the first time since January, while in Germany and France, private demand is also tepid. When combined with a slowing in the number of tactical registrations - those made by OEMs and dealers, as well as sales to rental fleets - in a few market, he says "the October slowdown is definitely explainable."
Nevertheless, this still raises the question of whether this is a temporary incident or the harbinger of things to come. Da Silva says, "In all likelihood, the market should remain on its positive path in the coming months: there is still some pent up demand to be released - six years of continuous crisis definitely made for a lot of delayed purchases; product activity - renewals and new model launches - is returning to a more traditional level compared to that seen between 2010 and 2013; and the general economy keeps improving, albeit from very low levels." However, he adds that there are a few obstacles that could hinder this situation. These includes if private or company car demand cannot compensate for tactical registrations; if a weakening in consumer confidence (measured by the EU) continues; or the current social and political situation worsens.
On the question of whether VW's sales are being hit by its current emissions-related woes, Da Silva says that "while its poor performance in October might indicate so, it is really too soon to come to this conclusion." He notes, "For one, we are contemplating registrations results. Given the sales practices in Europe where lots of cars are still ordered not bought on stock, it is very unlikely that customers intentions have already been translated into the numbers. Also, other brands and their parents have performed quite poorly in October. Renault-Nissan, one of the most efficient manufacturers so far in Europe, was far from impressive this month." Da Silva adds, "All in all, we do expect VW to suffer but it should only become really visible and attributable in the very late part of the year. This is all the more probable now that the situation is more directly linked to the European market itself."
IHS Automotive currently forecasts that passenger car registrations in the EU will grow by around 8.0% y/y during 2015 to almost 13.6 million units. However, we see this rate of growth slowing in 2016 to around 1.5% y/y, although the market will continue to gain until the end of the decade when we see registrations reaching over 14.4 million units.