Passenger car registrations in the European Union have recorded a solid 7.2% year-on-year (y/y) improvement during September, helping to maintain momentum in the year to date.
IHS Markit Perspective
- Significance: European Union passenger car registrations have grown by 7.2% year on year (y/y) to 1.455 million units during September, which has helped maintain growth in the year to date (YTD).
- Implications: The result in September is a return to normality after a bumpy summer for the region's passenger car registrations. However, while private demand has helped matters, fleet registrations have been one of the biggest drivers of growth in some markets, and not all of it natural corporate demand.
- Outlook: IHS Markit forecasts that passenger car registrations in the EU will grow by almost 6.0% y/y to 14.575 million units. However, we currently see a flattening taking place in 2017, with registrations standing at 14.59 million.
Passenger car registrations in the European Union have seen a positive performance during September, according to the latest data published by the European Automobile Manufacturers' Association (Association des Constructeurs Européens d'Automobiles: ACEA). Registrations during the month have grown by 7.2% year on year (y/y) to 1,455,180 units. However, unlike previous months, there has been no positive or negative impact from the number of working days. The gain this month has been broadly in line with the average of what has been seen so far this year, and as a result the year-to-date (YTD) total now stands at 11,243,263 units, a gain of 8.0% y/y.
The gain in the EU in September has also come alongside an improvement recorded in the European Free Trade Association (EFTA) region. Combined registrations in Iceland, Norway, and Switzerland have increased by 9.8% y/y to 41,026 units, which has taken its YTD growth into positive territory with an increase of 0.3% y/y to 364,003 units.
The positive growth in the wider EU in September has been as a result of the strong performance in a large number of markets. This included some of the five largest markets in the region, with Germany growing 9.4% y/y, Spain up 13.9% y/y, and Italy expanding by 17.4% y/y. However, France and the United Kingdom recorded more moderate single-digit percentage gains, although the latter very much helped the scale of the EU market due to September being one of its two peak selling months driven by the biannual number-plate change. It should also be noted that this market continues to grow despite 53 months of gains out of the past 55, and an expectation of a slowdown in the future.
Outside this group, there has also been a general air of positivity, with many benefiting from double-digit percentage gains. This has been generally underpinned by improving or buoyant economic fortunes and a general need for the replacement of aging parcs. Portugal and a host of markets in Central Europe are continuing to record improvements on the relatively low base of comparison, while growth in Sweden – which is still setting record breaking levels – continues to cling on. However, there have been some exceptions to this general improvement, with the Netherlands falling by 4.2% y/y and Greece contracting 10.3% y/y.
As a result of the strength of gains on a regional basis, many OEMs selling in the EU during September have recorded some degree of improvement. Leading this group is Volkswagen (VW) Group, which has increased sales by 5.2% y/y to 331,749 units. The VW brand took more than 45% of the group's sales at 156,651 units, although its gains were just 3.3% y/y, as the ageing Golf and Polo are showing signs of struggling in a number of markets. Offering more in the way of positivity has been Audi and Skoda, sales of which have grown by 8.3% and 8.5%. SEAT sales, though, were weak, having seen its registrations dip by 0.4% y/y despite the introduction of the Ateca crossover earlier in the year. Reports suggest though that it is struggling to meet the scale of demand for this vehicle.
Renault Group put in a far stronger performance during September, as its gain of 18.7% y/y helped it into second spot as it sold 128,934 units. This has been achieved mainly by a 19.1% y/y gain for the Renault brand in September, underpinned again by the automakers product launch strategy, but also a push of various models. Furthermore, the Dacia brand has contributed a 17.6% y/y gain. The gain seen by the Renault Group this month has also helped its surpass its local rival, Groupe PSA, which ended the month at 126,970 units, a decline of 5.2% y/y. All its brands have seen some degree of fall back from the moderate 1.0% y/y dip by Peugeot, Citroën's 10.2% y/y retreat, and DS Automobiles' fall of 15.0% y/y. However, new model launches such as the Peugeot 3008/5008 and the Citroën C3 are likely to help matters in future months.
Other weaker performers this month have been Ford (-0.9% y/y), Nissan (-2.2% y/y), and Volvo (-0.8% y/y). However, as mentioned above, there was wider growth among OEMs, with some of the biggest improvers being Fiat Chrysler Automobiles (FCA), sales of which have grown by 14.5% y/y, Kia (up 12.1% y/y), and Honda (up 9.2% y/y). Premium automakers have also offered important gains to the market, underlining the continued popularity of their vehicles which expand into new parts of the market. BMW Group was the biggest in terms of scale with 110,316 units registered, an increase of 12.3% y/y. However, Daimler and Jaguar Land Rover (JLR) put in far stronger performances than seen a year earlier of 18.0% and 30.8%, respectively, supported by new models.
Outlook and implications
After a bumpy ride through the summer months, with a disappointing July followed by a surprisingly strong August, the European passenger car market came back to a more normal pattern in September − one of solid but not outstanding growth. Carlos da Silva, manager of IHS Markit’s European light-vehicle sales forecast, said that "by and large, September was broadly in line with expectations with still no evidence of any impact from the UK's vote to leave the European Union". Indeed, he adds that this is rather normal since we are considering registrations, many of which will have been ordered prior to the Brexit vote.
In addition, the fundamentals of the passenger car market in the region have not changed that much, with pent-up demand continuing to feed the market, with a clear emphasis on fleet activity in most countries. However, the picture for private demand is a bit more nuanced, with deep contrasts between markets. For example, Da Silva says, in Germany private demand has been kicking in for a few months now, typically a sign that the market's basis is rather sound, while in Spain the market is still performing well despite no longer benefiting from the scrapping incentive which dried up in July, and in Italy a very old parc is leading to the release of pent-up demand despite a slightly deteriorating macro-climate. He adds that in the UK the seasonal number-plate change and still very enticing deals have kept the market afloat amid increasing uncertainty.
However, Da Silva notes some reasons for cautiousness. These include the levels of fleet demand, which have been the main engine behind the current growth, but not all of it is coming from "natural" corporate demand and some is through artificial means. He said, "The share of dealer activity is quite high for instance: this is partially understandable given the strong product activity at play but cannot explain the whole story. For instance one third of dealer cars registrations this September in France were actually operated on the very last day of the month, the perfect example of tactical practices." Rental cars have also helped the market in September: having grown by nearly 60% in Spain and almost 80% in Italy. Additionally, in the main, private demand has lagged behind in many markets, the exception to this being Germany.
We believe that October and the following couple of months will be very interesting in many regards. Among the questions which might begin to be answered include whether the impact of the Brexit vote will start to reverberate into a depression in private and corporate demand, as well as heightened tactical sales to compensate. However, we see the general picture as remaining positive for the near term. Indeed, Da Silva says that we do not see the market reaching a tipping point shortly, and that a general deceleration was already embedded in our forecast before the Brexit decision. Furthermore, the environment remains quite supportive in terms of purchasing power, energy prices, no inflation, and low interest rates, which allows for great deals for customers in the position to take advantage.
IHS Markit forecasts that passenger car registrations in the European Union will grow by almost 6.0% y/y to 14.575 million units in 2016. However, we currently see a flattening taking place in 2017, with registrations standing at 14.59 million units.
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The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.