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Customer LoginsGerman passenger car market rises 12.9% in May
A marked calendar effect boosted the German passenger car market in May, and the underlying trend was still robust as consumer and business confidence remains strong.
IHS Markit Perspective:
- Significance: The German passenger car market posted an accelerated 12.9% y/y increase in sales during May to 323,952 units, according to the latest data from the German federal motor transport authority.
- Implications: The market performed well as a result of strong consumer and business sentiment, although it should also be noted that there were two extra selling days in May in comparison to May 2016.
- Outlook: The German passenger car market has enjoyed a very solid start to 2017 with a 4.7% y/y increase in sales volumes to 1,459,333 units in the YTD, and IHS Markit is forecasting a full-year result in the region of 3.40 million units, which will equate to a rise of 1.5%.
The German passenger car market enjoyed a very strong result in May thanks to positive momentum from the robust German economy with consumer confidence and strong business sentiment fuelling a return to organic growth after the volatility of the Easter-affected months of March and April. Sales were up 12.9% year on year (y/y) for the month to 323,952 units, according to the latest data from the German Federal Motor Authority. This propelled the market to a positive results for the first five months of the year with a 4.7% y/y increase to 1,459,333 units. The share of fleet purchases rose by 8.5% y/y, with the share at 64% while private purchases took 36% of the market. However, it should be recognised that there was a significant calendar effect, without which the market would have still risen in the region of 5%.
The Volkswagen (VW) passenger car brand failed to keep pace with the overall growth of the market in April, but still managed a reasonably strong performance with an 8.8% y/y rise to 60,339 units during the month. The brand has been suffering from weak Polo and Passat sales in its domestic market in recent months, although the former will at least be alleviated when the oldest mainstream range in the VW line-up is replaced at the end of this year. However, on the positive side the second-generation Tiguan continues to draw customers into showrooms, while the heavily revised Mark-7 Golf has now gone on sale. For the first five months of the year the VW passenger car brand was down by 3.6% y/y to 272,321 units. Mercedes-Benz locked down its customary position as the second-best brand in Germany, although this has been less certain recently. However, it was back on form in May with an incredibly strong sales month which translated to a 25.2% y/y increase in sales volumes to 31,392 units, the first time that Mercedes-Benz has sold over 30,000 units in a month in its home market. It appears the brand engaged in some aggressive discounts and offers in order to achieve this figure, especially on older models like the A-Class, while the new E-Class and GLC continued to perform well. In the year to date (YTD) the Mercedes-Benz brand rose 8.6% y/y to 135,814 units, substantially outperforming the rise in the overall market. Audi took third spot in the market with sales coming in at 27,080 units, which translated to a rise of just 1.4% y/y. The brand is gaining some extra sales momentum from the recent launch of the A5 and A5 Sportback as well as the Q5 SUV. However, given that the brand's performance was far below the growth of the overall market, this probably has to be considered a somewhat disappointing result. For the YTD, Audi came in with a 1.8% y/y decline to post sales volumes for the YTD of 129,332 units. Ford once more beat BMW into fourth; BMW has not achieved its usual top-four position in a number of recent months. Ford's sales rose 23% y/y to 23,579 units, with big discounts offered on outgoing Fiesta models ahead of the launch of the new car, which went into production in Cologne in May. In the YTD, Ford sales rose 7.6% y/y to 105,983 units. BMW's sales during May were up by 6.9% y/y to 22,610 units, which underperformed the market as the 1-Series and 3-Series are both now well into the second halves of their model cycles. This was despite the recent launch of the new G30 5-Series. In the YTD, BMW sales were up by 1.1% y/y to 108,695 units.
Outlook and Implications
The May market sales numbers for the German passenger car market have been extremely strong, and show a market that is benefiting from the ongoing strength of the German economy despite the range of geopolitical challenges that currently threaten stability and economic growth. Despite various external concerns, the German economy continues to develop strongly and most importantly interest rates remain low and consumer confidence and business sentiment remain robust. The latter is particularly shown by the ongoing strength of the fleet market although the German market has been inflated at times in recent years by substantial dealer pre-registrations and there is evidence that this trend continues. Of the fleet registrations that were recorded in May, making up around 64% of the total market, IHS Markit estimates that around 25% of the overall market is made up of business car fleet sales to companies, while the rest is made up of tactical registrations made by car manufacturers (10%), rental fleets (10%) and the aforementioned dealer pre-registrations. The remaining 36% of the market is made up of private purchases, as illustrated above. The other interesting dynamic in the German market is the continuing trend of falling diesel sales in favour of gasoline (petrol) sales. This trend has been a feature of the market since the VW diesel emissions affair came into public focus in September 2015, and if anything it now appears to be accelerating. The vast majority of extra sales being made in Germany in May 2017 appeared to be gasoline-powered, with the overall gasoline number up 22.6%, and gasoline cars accounting for 56.8% of the overall market share during the month. Diesel took an overall share of 40.4%, with the overall diesel sales number falling by 1.4% y/y. The rest of the market was made up of 6,843 hybrids, which was a rise of 134% y/y; 2,323 units being plug-in hybrids (PHEVs), an increase of 193.3%, while pure EV sales rose 158.5% y/y to 1,520 units. The ongoing stimulus programme continued to have a positive effect. Domestic demand will remain the key contributor to German GDP growth, resting mainly on private and public consumption and on residential construction. Nevertheless, as global uncertainty levels wane to some extent (the election of Emmanuel Macron to the French presidency; and prospects for US economic policies under Donald Trump becoming clearer), investment in equipment and exports will strengthen as well. Consumer confidence has just attained a 15-year high, and registered unemployment recently declined to a post-unification and, therefore, 27-year low of 5.8%. Although real income growth will weaken markedly from around 2.0% in 2016 to below 1.0% in 2017 because of higher inflation, growth in real consumer spending will only weaken from 1.8% to 1.5%. Solid fundamentals will maintain confidence and consumer spending; these will continue to underpin the passenger car market, which will rise modestly to 3.40 million units in 2017, a rise of 1.5% y/y.
About this Article
The above article is from AutoIntelligence Daily by IHS Markit. AutoIntelligence Daily provides same-day analysis of automotive news, events and trends. Get a free trial.