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Customer LoginsSame-Day Analysis: Western European car sales momentum slows in October with 2.5% rise – forecast
The Western European market was affected by fewer working days in October, The Western European passenger car market posted a slower rate of increase in October, up 2.5% year on year (y/y) to 1,056,393 units, which was a slower increase than has been mostly the case throughout 2015. The principal reason for this was one less sales day in most major markets than last year, with 22 days. Despite the lower overall growth rate the final adjusted trend-cycle seasonally adjusted annual rate (SAAR) continued on its upward trend, and was again as high as it has been since February 2010 at 13.4 million units.remains on track for a strong full-year uplift despite signs in some markets of slowing momentum.
German passenger car demand has improved moderately during October. Registrations during the month have grown by 1.1% y/y to 278,372 units. Despite the weaker growth during October, the year to date (YTD) remained more positive with registrations up by 5.1% y/y to 2,686,310 units.
The French market has had a weaker month in October. The passenger-car segment rose 0.6% y/y to 161,030 units. When the number of working days is taken into account, this increases to 5.1% y/y. The gains last month resulted in registrations in the YTD standing at 1,891,096 units, a gain of 4.9% y/y.
Passenger car registrations in the Spanish market have risen much more weakly than we have previously been used to seeing in October. Sales have increased by just 5.2% y/y to 80,055 units. The latest contribution has also maintained the market's momentum in the YTD and volume now stands at 863,973 units, a gain of 20.5% y/y.
The Italian passenger-car market has also risen more slowly than earlier rates during October. Registrations were up by 8.6% y/y to 132,929 units, while earlier growth rates are in evidence through the YTD, which is now up 14.7% y/y to 1,330,005 units.
The 43-month run of gains in the UK passenger car market has come to an end during October. The number of cars registered this month has slid by 1.1% y/y to 177,664 units. However, when the one less working day is taken into account - 22 days versus 23 in October 2014 - growth of 3.4% y/y is recorded. In spite of the decline this month, the market's YTD performance reflect the strength in earlier months and for the 10 months, is now up by 6.4% y/y to 2,274,550 units.
Outlook and implications
In overall terms the number of working days had the biggest effect on the major Western European car markets in October The German passenger car market again developed positively during October, reiterating the fundamental strength and solid underpinnings of the local economy. However, there are some near-term risks, including geopolitical uncertainty linked to crises in the Ukraine and the Middle East, ramifications of the Eurozone sovereign debt crisis, worries about the Chinese economy and most recently the refugee burden on administrative capacity IHS's current forecast continues to predict GDP growth strengthening, hitting 1.7% in 2015 and 2.1% in 2016, up from 1.6% during 2014 and just 0.4% in 2013. Looking forward to the remainder of the year, IHS Automotive now forecasts an uplift of almost 5.0% y/y to nearly 3.19 million units. We also currently expect this improvement to continue next year to over 3.23 million units, and that it is likely to remain at over 3.2 million units for at least the next few years.
France's economy grew 1% during the first half of 2015 this is expected to continue for the remainder of the year, boosted by muted inflation, a weak euro, extremely loose monetary conditions, improving confidence levels, and gradually easing credit conditions. However, the economy still faces many headwinds that will limit the recovery over the medium term. In particular, the labour-market situation will remain difficult, although IHS expects some stabilisation. All in all, measures aimed at helping businesses will total EUR33 billion in 2016. IHS expects growth to average 1.1% in 2015 and 1.3% in 2016, following 0.2% growth in 2014. However, the dynamic of the passenger car market is undergoing something of a transition as the French government puts even greater pressure on phasing out the benefits for buying a diesel car. According to data published by trade association CCFA, the proportion of total diesel passenger car sales in the YTD fell to 57.8% of the market compared to 64.3% in 2014, while gasoline (petrol) passenger car registrations have increased from 32.7% to 38.2%. Overall, IHS Automotive anticipates improvements in light-vehicle sales during 2015. We expect passenger car registrations to increase by over 5.5% y/y to 1.9 million units supported by a better economic cycle and favourable product momentum, particularly from the French brands. We also currently expect LCV demand to grow by under 1.0% y/y during 2015 to over 374,000 units.
Despite the negative impact of the one less working day in September, this is still the 26th month in succession that the Spanish passenger-car market has recorded a sales increase. However, partly as a result of the working days, private demand has fallen 0.7% y/y to 50,177 units, despite customers still benefiting from the eighth and final round of the Plan Programa de Incentivos al Vehículo Eficiente (PIVE) scrapping scheme for now. Nevertheless, this has been offset by strong registrations to corporate customers (+16.6% y/y, 25,544 units) and rental fleets (+19.7% y/y, 4,334 units), with the former further showing the rebounding business confidence stemming from improvements in the wider economy. According to the latest IHS Automotive forecasts, the passenger car market is on course to reach the 1-million-unit mark this year, something which has not been achieved since 2008. We expect registrations to hit almost 1.05 million units by the end of 2015, an increase of over 22% y/y. Even so, the market remains far behind where it once was with a large, elderly parc, which ANFAC has said is two years older than the European average.
For the Italian passenger-car market, October is the latest month of growth although it has now ended its run of double-digit percentage gains partly as a result of the number of working days. Private demand remains buoyant with the latest data showing a gain of 13.6% y/y, with 68.4% of the market. However, demand for rental vehicles has fallen 4.4% y/y to 13.3% of the market. This was dragged down by a 45.7% y/y decline in registrations for those on short-term contracts, which could not be offset by a 10.9% y/y increase for those on long-term contracts. IHS Automotive currently expects the Italian passenger car market to grow by over 13.5% y/y in 2015 to 1.56 million registrations, with further gains anticipated until the end of the decade as the need to replace becomes even more important. Italy also has one of the oldest parcs in Europe with more than 9.5 million vehicles that are Euro III or less and an average age of 14 years old.
In the UK, it is perhaps a surprise that the now ended period of uninterrupted growth has lasted so long. However, it should be noted that the dip has come following September when the biannual age-related number plate change takes place, and which was the biggest September ever, as well as being the first time since 2004 that the market has broken through the 2-million-unit barrier within the first three quarters of the year. Also, as noted above, when the difference in working days is taken into account, evidence of growth can be seen. Low interest rates, consumer confidence and exciting new products combine to attract new car buyers. It is also likely to be related to the wide range of financing options to which customers have access, including leases that help reduce the monthly ownership costs when compared to buying outright. IHS remains relatively upbeat about the UK economy's growth prospects. In particular, persistent low oil prices should keep UK inflation (-0.1% in September) low, thereby supporting consumers' purchasing power along with stronger earnings growth and record-high employment. Looking at the remainder of the year, IHS Automotive is now anticipating UK registrations will reach almost 2.62 million units by the end of 2015, a gain of over 5.5% y/y. This is also up by more than one-third compared to 2011 when this growth run began. For the combined market, sales are still forecast to rise in line with the increase seen after the first 10 months, with an uplift of 7.7% y/y to 13.1 million units.