Commercial vehicle registrations in the EU have rebounded during May, growing by 9.0% y/y.
IHS Markit perspective
- Significance: Commercial vehicle registrations in the EU have rebounded during May, growing by 9.0% y/y.
- Implications: The improvement has been driven by both the LCV and MHCV categories, which have seen ups and downs in recent months due to working day factors.
- Outlook: IHS Markit expects that registrations in the EU will grow by 1.8% y/y to 1.97 million units during 2017, while MHCV registrations are expected to dip.
Registrations in the commercial vehicle (CV) market in the European Union (EU) have rebounded during May. According to the latest data published by the European Automobile Manufacturers' Association (ACEA), registrations of light commercial vehicles (LCVs) under 3.5 tonnes, medium and heavy commercial vehicles (MHCVs) and medium and heavy buses and coaches over 3.5 tonnes increased by 9.0% year on year (y/y) to 204,770 units. This has helped to underpin gains in the year to date (YTD), which is up 4.6% y/y to 992,247 units.
There was also a vast improvement in the European Free Trade Agreement (EFTA) region, comprising Iceland, Norway and Switzerland. Here, registrations jumped by 21.0% y/y to 7,825 units. This region has risen 7.2% y/y during the YTD to 33,785 units.
Going back to the EU, LCVs – which make up around 80% of the market here – have heavily influenced growth this month. During May, this type of vehicle has increased 8.4% y/y to 168,958 units. Support for this improvement has come from the majority of the biggest markets in the region. France again led the way with registrations of 36,738 units, which equated to a 7.6% y/y rise. Germany (+11.6% y/y), Spain (+21.1% y/y) and Italy (+9.2% y/y) have also risen. The exception in the market that makes up this group has been the United Kingdom, which after several years of growth and concerns as to the political and trading situation emerging, declined this month by 5.3% y/y. Nevertheless, it was still the second largest market in the EU.
Elsewhere in the EU the situation has been mixed, but the general trend is one of gains, with many being in the double-digit percentage range. This includes markets in Scandinavia, Southern Europe and Central Europe as well as Belgium, Austria and Netherlands. Among the exceptions to this has been the Polish market which slid by 4.3% y/y and Ireland which tumbled 18.6% y/y.
The strong growth this month has helped drive improvements in the EU during the YTD, with registrations now standing at 821,534 units, an increase of 5.0% y/y.
MHCV sales have also improved in the EU this month. Registrations of trucks with a GVW over 3.5 tonnes increased by 12.4% y/y to 32,560 units, while those for HCVs with a GVW over 16 tonnes gained 13.5% y/y to 26,572 units. The leading market in the MHCV category, Germany, had a far improved month as registrations gained by 16.7% y/y to 8,402 units. Other big volume markets made double-digit percentage gains this month including the UK, France, Poland, Netherlands and Poland, while Spain and Italy saw more modest increases of 4.4% y/y and 2.5% y/y, respectively.
This has helped the MHCV category remain firmly in positive territory in the YTD, it is up by 2.5% y/y to 154,347 units.
Outlook and implications
The situation in the CV market in the EU this month has to some degree tracked the performance that has been recorded in the passenger car market. This has been something of a return to normality after the fluctuations during the past few months related to working days. A buoyant March performance caused by a low base of comparison related to Easter falling during March 2016 was offset in April as the Easter holiday period came into play, with some markets losing up to two working days on top of the one that they would have lost anyway.
Nevertheless, the general picture in the region seems to have an air of positivity. The growth is likely to have been helped by the robust economic performance in the Eurozone, with a real GDP increase of 0.5% quarter on quarter (q/q) according to Eurostat figures, with positive contributions from Germany, Spain, France, Italy, and the Netherlands, among others. Domestic demand is likely to have been the driver of this improvement, with fixed investments leading the way. Furthermore, the IHS Markit Eurozone Manufacturing PMI rose 0.3 point to 57.0 in May, as output, new orders, and employment continued to accelerate. Job creation was the strongest in the survey's 20-year history. Meanwhile, the services PMI edged down to 56.3 from April's six-year high of 56.4. Sustained growth in services output and new orders helped lift business confidence to an 85-month high. IHS Markit expects that real GDP growth will ease slightly to 0.4% q/q in the second quarter and remain there in the final two quarters of 2017, although recent survey evidence suggests that an upward revision to near-growth prospects is more likely than a downward revision. For the full year, real GDP growth is likely to remain at 1.8%, and fall to 1.7% in 2018. Although the latest data suggest forecasts risks are slanting to the upside, the story in the region is not consistent, with some economies still struggling to develop stronger and more broadly based recoveries.
Despite the previously forecast slowdown in the UK due to earlier record performances, IHS Markit anticipates that it will be another year of positive growth for the LCV category in the EU. We expect that registrations will grow by 1.8% y/y to 1.97 million units. This suggests that the market will lose some of the early gains built up over the next eight months, but it is unlikely that demand will plunge significantly. However, we do see a fall appearing in 2018 and a certain amount of fluctuation over the following few years.
As for the MHCV market in the EU, Christiane Stein, IHS Markit Manager for Global Heavy Truck Research has said that the region shows resilience to the challenging influences of Brexit and elections which have taken place. She notes that in several markets in Western and Central Europe, truck demand decreased or growth is slowing. Foreign direct investment has also not rebounded substantially in Central Europe from last year's low levels, and projected weak demand from the main trading partners will limit the prospects of further acceleration this year, and curb demand. The only real bright spot is Italy, where the government has been running incentive programs since 2016 and continues to do so. IHS Markit ultimately expects demand to fall over the second half of 2017 to around 350,000 units. This mainly reflects the boost to haulage capacity from the record sales in previous years and a weakening of leading economic indicators for this year.
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