Passenger car registration growth in the EU has rebounded during May, gaining by 7.6% y/y.
IHS Markit perspective
- Significance: Passenger car registrations in the EU have grown 7.6% y/y during May according to the latest data published by ACEA.
- Implications: This is a reversal of the situation in April after the region has fluctuated as a result of working-day factors related to Easter, as well as more localised factors.
- Outlook: For 2017, IHS Markit currently expects that the passenger car market in the EU will grow by 1.7% y/y to almost 14.94 million units, an increase behind the 7.0% y/y improvement during 2016.
The passenger car market in the European Union (EU) has rebounded during May, according to the latest data published by European Automobile Manufacturers' Association (Association des Constructeurs Européens d'Automobiles: ACEA). Registrations during the month have grown by 7.6% year on year (y/y) to 1,386,818 units. This has helped to increase the growth momentum in the year to date (YTD) with a rate that now stands at 5.3% y/y at 6,719,209 units.
There has also been an improvement recorded in the European Free Trade Agreement (EFTA) market as well this month. The region made up of Iceland, Norway and Switzerland has grown by 9.5% y/y to 46,418 units, which has resulted in it returning to growth in the YTD with a marginal increase of 0.6% y/y to 201,287 units.
The growth in the market this month has been underpinned by improvements in many countries, including most of the key markets in the EU. Germany led the way with 323,952 units registered, an increase of 12.9% y/y. It was also followed by an 8.9% y/y gain in France and an 8.2% y/y improvement in Italy, with the latter continuing to be helped by temporary budgetary measures that are stimulating acquisitions by businesses. Furthermore, the Spanish passenger car market has also grown by 11.2% y/y as company cars and rental fleets are driving the market, while private demand is also up despite the withdrawal of the Plan PIVE incentive almost a year ago.
However, the market in the United Kingdom has fallen for the second time in succession during May, recording a decline of 8.5% y/y. This is related to a combination of factors including the imposition of new vehicle excise duty (VED) rules which caused a pull-forward in registrations, political uncertainty related to the general election, softening macroeconomic data, and a general slowdown in the market place after a long period of upswing.
Outside these big five markets, the general performance has been one of improvement, with a number recording double-digit percentage gains. This includes markets in Central Europe and Portugal, as well as Austria and Netherlands, although the latter is built upon a low base of comparison. The exception to these gains has been Cyprus, Greece and Ireland.
In line with the gain recorded in the EU, many OEMs' registrations rose this month. Market leader Volkswagen (VW) Group's increase outpaced the market as a whole with an uplift of 8.2% y/y to 335,187 units. This was underpinned by an 8.9% y/y increase for the VW brand, while double-digit percentage gains have been recorded by Skoda, SEAT – both of which are benefiting from recently introduced models in the crossover space – and Porsche. By comparison, the Audi brand has risen by a very modest 0.3% y/y in May, despite the introduction of the Audi Q2 crossover.
The Renault Group further extended its lead over its rival Groupe PSA in May, growing by 10.2% y/y to 151,798 units. While the Renault brand recorded a gain of 4.0% y/y as demand for models that had previously stimulated growth has eased, the Dacia brand has contributed the most, having surged by 27.7% y/y. It has been a relatively positive month for PSA, with its registrations up by 4.7% y/y to 141,557 units. However, while Peugeot and Citroën both contributed to this improve, helped by recent introductions, the DS Automobiles brand once again struggled with a fall of 35.1% y/y for the month alone.
Other OEMs to benefit from the upswing this month include Fiat Chrysler Automobiles (FCA), Toyota Group and Suzuki, all of which reported double-digit percentage increases. However, Opel Group has struggled with a dip of 2.3% y/y. It has been a mixed month among premium OEMs, as while Daimler reported a gain of 13.4% y/y and Volvo Cars recorded an improvement of 9.5% y/y, BMW Group increased by just 2.0% y/y and Jaguar Land Rover (JLR) contracted by 8.9% on a transition to a new model and the weakness in its important UK market.
Outlook and Implications
The performance of the market this month comes in the wake of a period of fluctuation in the previous couple of months. This has mainly been related to working day factors stemming from Easter falling in March in 2016 and April in 2017. This is worth up to two fewer days in some markets, which can cause large swings as the lower and higher base comparisons come into play. A normalisation appears to have occurred in May, and the evidence is certainly positive in the main. A strong rate of growth has been stimulated by a 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, Netherlands, Finland and Portugal. Domestic demand is likely to have been the driver of this improvement, with fixed investments leading the way. Labour markets are also continuing to improve; unemployment is down in the region, while political risks are continuing to diminish. However, future growth could be hampered by consumers becoming more cautious as their purchasing power and real incomes are squeezed by increased inflation and limited wage growth. 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
For 2017, IHS Markit currently expects that the passenger car market in the EU will grow by 1.7% y/y to almost 14.94 million units, an increase behind the 7.0% y/y improvement during 2016. In the longer term, our outlook will definitely evolve as we integrate ongoing changes, although at present we anticipate further growth into 2019 that will fall back as we enter the next decade. The passenger car market in the EU is also not expected to surpass the 15-million-unit mark in the medium term either.
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